Wednesday, August 2, 2006Economy is on right track
The Central Bank's review of the first quarter of 2006 has the economy expanding at a healthy pace, attributed to further growth in tourism earnings and robust foreign investment inflows. The Central Bank also highlighted the contribution of elevated domestic consumption, in-vestment expenditures and credit expansion for the improvement.
But the review stated that sustained increases in international oil prices continued to exert upward pressure on domestic inflation. In the fiscal sector, strengthened tax receipts outpaced expenditure increases, resulting in a narrowing of the overall deficit for the third quarter of 2005-06. Externally, elevated in-vestment outlays, consumer spending and higher fuel costs contributed to a significant widening in the quarterly current account deficit. The review showed that the net free cash reserves of the banking system contracted by $2.5 million (1.3 per cent) to $189.0 million, contrasting with a more marked reduction of $40.2 million (14.8 per cent) last year, which also corresponded to a seasonal reallocation of resources to Government securities.
This represented a reduced 4.1 per cent of Bahamian dollar deposits, compared to 5.5 per cent in 2005.
In contrast to deposit trends, the review showed the domestic credit expansion firming to $151.9 million (2.6 per cent) from $132.6 million (2,5 per cent) in 2005, for an end-quarter stock of $6,051.4 million.
Growth in private sector credit accelerated to $162.0 million (3.3 per cent) from $39.4 million (0.9 per cent), predominantly concentrated in Bahamian dollar claims and attributed to more robust lending under residential mortgages (3.1 per cent) and consumer credit (2.5 per cent). Preliminary estimates of the Government's budgetary operations for the third quarter of fiscal year 2005/06 indicated a one-third reduction in the overall deficit to $22.2 million from $33.2 million a year earlier.
Healthier demand conditions supported improved tax collections of 21.1 per cent to $287.7 million, while non-tax revenues were augmented by 39.9 per cent to $23.5 million.
Budgetary financing during the quarter included a $75.0 million Registered Stock issue in January and a $1.8 million draw down on external loans.
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