The Gov­er­nor of the Cen­tral Bank of The Ba­hamas (CBB), John Rolle, says based on pre­lim­i­nary da­ta, the Ba­hami­an econ­o­my ex­pand­ed at a healthy, but mod­er­at­ed pace in 2024, led by the per­for­mance in tourism and con­tin­ued for­eign in­vest­ments al­so at­tract­ed in­to the sec­tor.

Cen­tral Bank Gov­er­nor, John Rolle, speak­ing at the re­lease of Month­ly Eco­nom­ic and Fi­nan­cial De­vel­op­ments (MEFD) for De­cem­ber 2024, said the econ­o­my is ex­pect­ed to con­tin­ue to grow in 2025, but pos­si­bly slow­er than the rates achieved in 2024, as the coun­try gets clos­er to its medi­um-term po­ten­tial, which is still be­low two per cent.

He said for tourism, the cruise sec­tor is like­ly to dri­ve fur­ther record gains in vis­i­tor ar­rivals and this will boost the up­side po­ten­tial for earn­ings. How­ev­er, the ex­tent of growth in stopover ac­tiv­i­ty will con­tin­ue to have a greater in­flu­ence on the over­all trends in the in­dus­try’s earn­ings.

“That said, sus­tained in­vest­ments in both stopover and cruise ca­pac­i­ty should set the stage for more per­ma­nent jobs when these in­vest­ments tran­si­tion in­to op­er­a­tions mode.

“It is the econ­o­my’s ex­pan­sion­ary prospects, de­clin­ing cred­it delin­quen­cy and the more en­trenched sup­port of the cred­it bu­reau that favour con­tin­ued strength­en­ing in lend­ing to the pri­vate sec­tor in 2025.”

Rolle said that from a mon­e­tary pol­i­cy per­spec­tive, the Cen­tral Bank is sup­port­ive of this out­look, which cor­re­sponds to a po­ten­tial re­duc­tion in ex­ter­nal re­serves, but in an oth­er­wise healthy for­eign ex­change en­vi­ron­ment.

“This would al­so tar­get some re­duc­tion in bank liq­uid­i­ty. In line with broad­er ob­jec­tives to re­move liq­uid­i­ty from the sys­tem, the Cen­tral Bank will al­so ac­com­mo­date faster repa­tri­a­tion of ex­cess cap­i­tal or div­i­dends from the bank­ing sys­tem, in keep­ing with medi­um-term plans that were paused dur­ing the pan­dem­ic.”

Rolle said that to sup­port the lend­ing en­vi­ron­ment even fur­ther, the Cen­tral Bank will con­tin­ue to as­sess how ac­cess to cred­it for pro­duc­tive busi­ness ac­tiv­i­ties can be eased, in­clud­ing in­stances where ex­change con­trol still has an im­pact.

“In ad­di­tion, as far as the move­able col­lat­er­al as­sets reg­istry is con­cerned, con­cen­trat­ed ef­forts will be made over the first half of 2025 to com­plete the im­ple­men­ta­tion of the reg­is­ter, in con­sul­ta­tion with lend­ing in­sti­tu­tions and co­op­er­a­tion with the At­tor­ney Gen­er­al’s Of­fice.”

How­ev­er the Cen­tral Bank Gov­er­nor ac­knowl­edged that there are down­side risks which al­ways jus­ti­fy a bal­ance of some pru­dence in mon­e­tary pol­i­cy.

He said un­cer­tain­ties per­sist around un­rest in the Mid­dle East and the war in Ukraine.

“In ad­di­tion, the es­ca­la­tion of glob­al trade ten­sions could lead to high­er in­fla­tion and stall fur­ther in­ter­est rate re­duc­tions in the ma­jor economies.

“Any con­se­quen­tial slow­down in the North Amer­i­can economies, or neg­a­tive im­pacts on US house­holds’ pur­chas­ing pow­er, would al­so lim­it near-term gains in tourism, whether in terms of growth in ar­rivals or the in­dus­try’s abil­i­ty to pre­serve pric­ing gains in ac­com­mo­da­tions.”

Rolle said that the Cen­tral Bank will con­tin­ue to mon­i­tor trends and pur­sue the ap­pro­pri­ate poli­cies to safe­guard fi­nan­cial sta­bil­i­ty and the val­ue of the Ba­hami­an dol­lar.

The CBB Gov­er­nor said that in 2024, em­ploy­ment gains con­tin­ued to reg­is­ter, and de­vel­op­ments re­mained sup­port­ive of the gov­ern­ment’s deficit re­duc­tion ef­forts.

Rolle said The Ba­hamas ben­e­fit­ed from ad­di­tion­al mod­er­a­tion in in­fla­tion, as av­er­age con­sumer price in­creas­es slowed at the in­ter­na­tion­al lev­el, and do­mes­tic en­er­gy sec­tor ad­just­ments caught up with the ex­ter­nal sav­ings from re­duced oil prices.

In the mon­e­tary sec­tor, do­mes­tic cred­it growth strength­ened sig­nif­i­cant­ly, with lend­ing, con­di­tions im­proved and av­er­age loan delin­quen­cy rates fur­ther sub­sided.

“Nev­er­the­less, as ac­tiv­i­ty still sub­sist­ed be­low the lev­els that the Cen­tral Bank an­tic­i­pat­ed, the bank­ing sys­tem’s liq­uid­i­ty fur­ther ex­pand­ed; and the ex­ter­nal re­serves grew mod­est­ly,” Rolle said.

He said that in 2024, the econ­o­my’s growth rate is pro­ject­ed to have slowed, be­low the es­ti­mat­ed 2.6 per cent record­ed in 2023.

“There was fur­ther mod­er­a­tion in stopover tourism ac­tiv­i­ty, which al­though ful­ly re­cov­ered from the pan­dem­ic, faced a con­strained sup­ply of ho­tel rooms. Based on avail­able da­ta, when com­pared to the same pe­ri­od of 2023, air ar­rivals, which are most­ly stopover in­flows, were ap­prox­i­mate­ly un­changed over the first 11 months of the year.”

How­ev­er, Rolle said that over the same months in 2023, there was still a strong re­cov­ery el­e­ment in growth of near­ly 20 per cent. In ad­di­tion to ca­pac­i­ty, mar­ket de­mand is al­so es­ti­mat­ed to have been held back over the sec­ond half of 2024 due to in­creased dis­rup­tions dur­ing the hur­ri­cane sea­son, and con­sumer un­cer­tain­ty lead­ing up to the US pres­i­den­tial elec­tions in No­vem­ber.

He said look­ing ahead to 2025, ac­com­mo­da­tions con­straints could con­tin­ue to lim­it earn­ings gains and more­over, the av­er­age night­ly room rates are al­so ex­pect­ed to ex­pe­ri­ence more sub­dued gains, fol­low­ing healthy av­er­age ap­pre­ci­a­tion in the im­me­di­ate years af­ter the pan­dem­ic.

Rolle said the va­ca­tion rental mar­ket has sup­ple­ment­ed stopover ca­pac­i­ty and earn­ings growth. The rental in­ven­to­ry ex­pand­ed by just over five per cent dur­ing 2024.

He said the av­er­age oc­cu­pan­cy rates on list­ings de­creased slight­ly and the av­er­age night­ly room rate rose at a much more tem­pered pace, as op­posed to healthy ap­pre­ci­a­tion both dur­ing and in the im­me­di­ate years since the pan­dem­ic.

The BB Gov­er­nor said that the cruise seg­ment was un­con­strained, with ro­bust growth in 2024. It al­so con­tin­ued to at­tract sig­nif­i­cant for­eign di­rect in­vest­ments in­to pri­vate des­ti­na­tion fa­cil­i­ties, par­tic­u­lar­ly im­pact­ing Fam­i­ly Is­land economies.

“While the per vis­i­tor spend­ing from the cruise seg­ment is mul­ti­ples low­er than for on­shore vis­i­tors, it is ex­pect­ed that the re­tained lo­cal con­tent, per dol­lar of spend­ing, is high­er than for stopover vis­i­tors. This is be­cause it is more con­cen­trat­ed in cul­tur­al and recre­ation­al ac­tiv­i­ties.

“Al­so, such ex­pen­di­tures sig­nif­i­cant­ly ben­e­fit small busi­ness­es and self-em­ployed per­sons. This un­der­scores the po­ten­tial for fur­ther boost in re­turns from the sec­tor, by ex­pand­ing the menu of on­shore ac­tiv­i­ties in which these vis­i­tors can en­gage.”

Rolle said that tourism and in­vest­ment trends con­tin­ued to have pos­i­tive im­pacts on em­ploy­ment dur­ing 2024. How­ev­er, giv­en the re­vised method­ol­o­gy adopt­ed by the Ba­hamas Na­tion­al Sta­tis­tics In­sti­tute (BN­SI), the avail­able da­ta was not di­rect­ly com­pa­ra­ble to years pri­or to 2024.

He said one note­wor­thy shift in the da­ta, though, was the im­proved labour force par­tic­i­pa­tion rate for males, which now bet­ter tracks how the econ­o­my is ben­e­fit­ting males.

“In the mean­time, as in­ter­est rates have fall­en in the US and oth­er ma­jor in­dus­tri­al coun­tries, the fund­ing en­vi­ron­ment for for­eign di­rect in­vest­ments al­so im­proved, mak­ing it eas­i­er for The Ba­hamas to sus­tain cur­rent in­flows.

“As a caveat though, the near-term pace of in­ter­est rate re­duc­tion is ex­pect­ed to pause un­til there is a bet­ter un­der­stand­ing of any im­pact to in­fla­tion from the new trade poli­cies be­ing pur­sued by the Unit­ed States.”

The Cen­tral Bank Gov­er­nor said that the for­eign ex­change mar­ket trends al­so sup­port the as­sess­ment that, post the pan­dem­ic re­cov­ery, the econ­o­my is ex­pand­ing slow­er on both the earn­ings side and in busi­ness and con­sumer spend­ing.

He said at com­mer­cial banks, to­tal pur­chas­es of for­eign ex­change from the pri­vate sec­tor grew by just 2.3 per cent to US$7.3 bil­lion in 2024, be­ing on­ly in­cre­men­tal­ly var­ied for the sec­ond con­sec­u­tive year.

The rate of growth in for­eign cur­ren­cy sales to the pri­vate sec­tor, which funds im­ports, and pay­ments abroad on in­vest­ments and oth­er ac­tiv­i­ties, in­creased mar­gin­al­ly by 1.5 per cent, al­so vary­ing just slight­ly for a sec­ond year in a row, in the neigh­bour­hood of US$7.2 bil­lion.

Rolle said since in­flows still dom­i­nat­ed, the com­mer­cial banks had a larg­er net pur­chase of for­eign ex­change from the pub­lic and were there­fore able to make a larg­er net sale of for­eign ex­change to the Cen­tral Bank.

“This de­vel­op­ment, and a re­ver­sal in the Cen­tral Bank trans­ac­tions with the pub­lic sec­tor, to a net pur­chase of for­eign ex­change rather than the no­table net sale of for­eign ex­change in 2023, con­tributed to a net boost to the ex­ter­nal re­serves, by ap­prox­i­mate­ly US$270 mil­lion to US$2.62 bil­lion in 2024.

“A third fac­tor, which helped to grow the for­eign re­serves in 2024, adding to al­most one-fourth of the gains, was stronger earn­ings on the in­vest­ment port­fo­lio of the Cen­tral Bank. As of the be­gin­ning of Feb­ru­ary 2025, the re­serves were es­ti­mat­ed at US$2.63 bil­lion, just ahead of the re­bound, which should oc­cur dur­ing the busy por­tion of the tourist sea­son.”

Rolle said nev­er­the­less, ex­ter­nal re­serves are pro­ject­ed to con­tract over­all in 2025 be­cause do­mes­tic banks are ex­pect­ed to grow cred­it to the pri­vate sec­tor at a stronger pace than in 2024; and the sys­tem should con­tin­ue to sus­tain a larg­er net share of the gov­ern­ment’s bor­row­ing needs in lo­cal cur­ren­cy, as op­posed to for­eign cur­ren­cy.

He said last year, com­mer­cial bank cred­it growth was sig­nif­i­cant­ly ac­cel­er­at­ed. Lend­ing to the pri­vate sec­tor rose by al­most US$350 mil­lion or by about six per cent as com­pared to about US$60 mil­lion or just one per cent in 2023.

“This pick­up was across con­sumer cred­it and busi­ness lend­ing, and it in­clud­ed a re­bound in mort­gage fi­nanc­ing. In the mean­time, the av­er­age non-per­form­ing loans rate, or the share of loans that were three months or more be­hind in pay­ments, was fur­ther re­duced to 5.5 per cent by the end of 2024, down from 6.7 per cent in 2023. This im­proves the cli­mate for fu­ture lend­ing,” Rolle said.

NAS­SAU, Ba­hamas, Feb 4, CMC

CMC//gh/ir/2025