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Economic Overview Global Economic Forecasts Domestic Developments Tourism & Foreign Direct Investment Inflation Fiscal Sector Monetary Sector Economic Outlook Policy Agenda 2
Mild conditions: on-going FDI and hurricane rebuilding support for GDP (Real construction; tourism mildly positive but disrupted by Hurricane Sector) Matthew. Lower to 11.6% in November 2016, from 14.9% in 2015; some Employment boost from hurricane rebuilding. Inflation was negative (-0.35%) in 2016, a turnaround from a 1.78% Inflation rise a year earlier, when VAT passthrough was completed. Banking sector liquidity was bolstered by net foreign currency inflows Bank from real sector activity and Central Bank financing to Government. Liquidity External Boosted by net tourism inflows; public sector debt operations; low oil Reserves bill; reinsurance inflows.
• Regional growth has slowed since the global recession in 2008. • Bahamas annual gains averaged 2.8% in the 10 years prior; but officially negative on average since then (-0.4% ). • Similar pattern of growth slowing in other Caribbean economies. % Real GDP The Bahamas % Real GDP Regional 20 20 Comparison 15 15 10 10 5 5 0 0 -5 -5 -10 -10 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* Jamaica Belize Bahamas SOURE: The World Bank Barbados Trinidad & Tobago *Projected SOURE: The World Bank *Projected 4
Table 1 IMF WORLD OUTLOOK BREXIT fallout & rebalancing in BREXIT fallout & rebalancing in (GDP Projections for 2016) China, expected to cause global China, expected to cause global growth for 2016 to soften to growth for 2016 to soften to 2015 2016 2017 3.1%. 3.1%. World 3.2 3.1 3.4 The 2017 forecast shows global The 2017 forecast shows global US 2.6 1.6 2.3 growth strengthening to 3.4%. growth strengthening to 3.4%. U.S. expected to improve but U.S. expected to improve but UK 2.2 2.0 1.5 UK and Europe soften UK and Europe soften Euro further. further. 2.0 1.7 1.6 Area China 6.9 6.7 6.5 Note : IMF's forecasts will update in Note : IMF's forecasts will update in Source: IMF “World Economic Outlook” January 2017 April. UK and US might be April. UK and US might be update upgraded. upgraded. 5
Tourism Sector Performance Visitor Arrivals Millions Millions 1.40 7.0 Air arrivals and tourism earnings still recovering 1.35 6.0 towards pre-recession levels. 1.30 5.0 Total arrivals for Jan-Oct 2016, up by 2.6% from 2015. 1.25 4.0 Stopover revenue up by 0.8%. 1.20 3.0 Airport data 1.15 2.0 U.S passengers rose by 1.9% in 2016 (vs +1.4% in 2015); other 1.10 1.0 traffic fell 4.1%, (vs +1.8% in 2015). 1.05 0.0 Similar patterns revealed in Jan 2017. Air (Left Side) Total (Right Side) Source: Ministry of Tourism and NAD
Foreign Investment … estimated net FDI has contracted and remains low given impact of Baha Mar slowdown. Data still plagued by incomplete coverage of foreign residential construction. B$ Million B$ Million 1,000 1,400 1,200 800 1,000 600 800 400 600 200 400 0 200 2008 2009 2010 2011 2012 2013 2014 2015 2016 -200 0 Loans Property Purchases Other Investments Net FI (Right Side) Significant FI Projects Baha Mar => $3.5 billion Albany => additional $150 million Mediterranean Shipping Company => $200 million Ocean Cay Development
Foreign Investments Baha Mar is still the headline development. What's new: On December 2016: announced sale to Chow Tai Fook Enterprise Ltd. (CTFE) . Phased opening to begin in April, 2017; expected to be fully operational by Spring 2018. Baha Mar's internal projections: Expects to generate extra 315,000 stopover guests An estimated 5,500 – 7,000 jobs are expected to be created; approx. $167-$196 million in annual employee compensation To-date, $3.50 billion has been invested in the project; an additional $700 million is to be invested by China EXIM Bank to complete the resort
Other FDI Projects Project Name Recent Developments Children’s Bay Cay and Williams Cay, • $200 million ‘eco-friendly ultra luxury resort’ Exuma • 50-room five-star resort on Children’s Bay Cay; a private resort and golf course on Williams Cay Mediterranean Shipping Company • $200 million ; ground broken on January 16, (MSC) , Ocean Cay cruise port, hotel & 2017 cultural amenities • 100 jobs expected in the near-term, & 300 jobs to be filled for resort operations • Over the next 2 years, 1,100 construction jobs projected to be created • Over 220 jobs expected on cruise ships Carnival Cruise Port, East Grand • Still in ‘pipeline’ phase Bahama Hutchinson Whampoa Phase V, • $300 million container port expansion; Freeport awaiting start-up 9
1,385 persons were employed as a direct result of Hurricane Matthew. Unemp. now 11.6% vs 12.7% in May % Unemployment Rate 2016, and 14.9% in Nov 2015 . NP:12.9%, GB:13.3%, AB:9.1%, 40 Bim:4.0%, Exm:8.0% . 35 30 Youth unemp. fell by 5.0 pct. points to 2014: 15.7% 25 25.1% since 2015. Improved slightly Ages 20 15-24 since May 2016. 15 10 2008:8.7% Jobless rate for women (14.0%) still higher 2016:11.6% 5 than for men (9.4%); both reduced from 0 17.0% and 12.7%, respectively in 2015. 2008 2009 2011 2012 2013 2014 2015 2016 All Bahamas Youth Unemployment Discouraged workers fell by 15.0% to 2,095. By island: NP ( ↓ 16.%), GB SOURCE: The Department of Statistics ( ↓ 18%) AB( ↓ 11%). Source: Department of Statistics
Prices increase have began to normalize lower following the VAT transition. Recent declines for restaurants & hotels and food & non-alcoholic beverages categories; significant deceleration in inflation rates for health, recreation & culture, alcohol beverages, tobacco & narcotics, furnishing, household equipment & routine household maintenance and clothing & footwear. % VAT Implementation 20 15 10 5 0 Mar '13 Jun '13 Sep '13 Dec '13 Mar '14 Jun '14 Sept'14 Dec '14 Mar '15 Jun '15 Sep '15 Dec '15 Mar'16 Jun'16 Dec'16 Sep'16 -5 Inflation -0.35% at end-Dec . -10 Alchohol Beverages, Tobacco & Narcotics Health Recreation & Culture Housing, Water, etc All Bahamas Source: Department of Statistics 11
Implications of Lower Global Oil Prices Crude Oil Prices and BEC Fuel Charge Prices rose slightly in • 120.00 30 2016, but remained 100.00 25 lower than pre-June Cents per kWH 80.00 20 US$ per barrel 2014 highs. 60.00 15 40.00 10 • BPL’s fuel surcharge at 12.67/ KWh at end-Sep: 20.00 5 12.1% month on 0.00 0 month, but 11.7% 2014 Mar May Jul Sep Nov 2015 Mar May Jul Sep Nov 2016 Mar May Jul Sep Nov Jan Jan Jan year-on-year. Oil Prices BEC cents per KWH Fuel Charge • Gasoline and diesel Gasoline & Diesel Prices prices have remained 6.00 fairly stable in 2016. B$ per gallon 5.00 4.00 3.00 2.00 1.00 0.00 Diesel Gasoline SOURCE: Central Bank of The Bahamas 12
Fiscal Indicators First half FY2016/17: deficit $192.3 million to First half FY2016/17: deficit $192.3 million to • • Chart 6 B$M $314.2 million. Reflects hurricane rebuilding $314.2 million. Reflects hurricane rebuilding Central Government Fiscal Deficit 2500 efforts and disruptions in revenue collection. efforts and disruptions in revenue collection. 2000 Total expenditure : $121.9 million (11.7%) Total expenditure : $121.9 million (11.7%) 1500 • • Capital : $71.7 million (80.2%), vs.. Capital : $71.7 million (80.2%), vs.. 1000 hurricane rebuilding, coastal protection, hurricane rebuilding, coastal protection, 500 and road reconstruction & development. and road reconstruction & development. Current : $52.6 million (5.5%), with Current : $52.6 million (5.5%), with 0 $29.9 million (6.5%) increase in transfers $29.9 million (6.5%) increase in transfers -500 (mainly for NHI) . (mainly for NHI) . -1000 Revenue Expenditure Surplus/Deficit 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17* Revenue : $44.4 million (5.0%) Revenue : $44.4 million (5.0%) • • Tax rev: $39.5 million (4.9%) , with VAT Tax rev: $39.5 million (4.9%) , with VAT * Six months of FY2016/2017 $15.4 million (4.9%). $15.4 million (4.9%). 90.0 National Debt to GDP Ratio 77.9 80.0 70.0 • • Deficit Financing: Domestic loans and bonds. Deficit Financing: Domestic loans and bonds. 60.0 50.0 % 40.0 33.7 30.0 20.0 10.0 0.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* * forecast 13
Hurricane Matthew Impact Estimated total losses of at least $600 million. Private sector insured losses reported • approximated $400 million • Public sector costs exceed $200 million: (infrastructure damages more than triple that of Hurricane Joaquin) Protracted shutdown of tourism plant in Grand Bahama. • Subsequent reduction in airlift and marketing support Policy responses • Fiscal concessions (exigency orders, and filing extensions) • Eased Central Bank credit policy Source: US National Oceanic and Atmospheric Administration 14
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