Economic indicators for February suggest that The Bahamas’ economy continued to expand at a steady pace relative to the corresponding period in 2025, with activity gradually moving closer to its long-term potential. This performance was supported by ongoing strength in the tourism sector, particularly within the cruise segment and improved stopover receipts, despite persistent capacity constraints. At the same time, fiscal developments signalled emerging pressures, as preliminary data for the second quarter of FY2025/26 showed a widening budget deficit, driven mainly by a sharper decline in revenue relative to expenditure. Monetary conditions also reflected some tightening, with a reduction in banking system liquidity despite deposit growth and a contraction in domestic credit, while external reserves strengthened due to sustained private sector foreign currency inflows.

Within the real sector, tourism remained the primary driver of economic activity, continuing to record healthy gains despite structural limitations in the high-value stopover segment. Although official data from the Ministry of Tourism for February was not yet available, supporting indicators pointed to continued expansion. Total outbound departures increased by 4.9% to 133,336, reflecting a strong 54.0% rise in non-US international travel, which more than offset a modest decline in US departures. On a year-to-date basis, outbound traffic grew by 3.4%, underpinned by robust growth in non-US markets alongside softer US travel demand.

This positive momentum was also evident in the short-term rental market, where rising demand supported both occupancy and pricing. Total room nights sold increased by 10.1%, accompanied by higher occupancy rates across both entire property and hotel-comparable listings. Average daily rates also moved higher across both segments, signalling sustained pricing strength within the sector. Year-to-date trends reinforced this performance, with double-digit growth in room nights sold and continued gains in average daily rates, highlighting the resilience of tourism demand despite ongoing capacity constraints.

In contrast, fiscal outcomes reflected a more challenging environment. The budget deficit widened to $201.3 million, as a 5.3% decline in total revenue exceeded the 3.1% reduction in expenditure. The fall in revenue was largely driven by weaker tax collections, particularly from international trade, goods and services, and property-related taxes. Lower receipts from departure taxes, export and excise duties, and business-related levies contributed to this decline, indicating softer performance across key revenue-generating segments.

Although non-tax revenue provided some support, increasing modestly due to higher collections from goods and services and administrative fees, this was insufficient to offset the broader weakness in tax revenues. On the expenditure side, reductions in recurrent spending, including lower outlays on goods and services, subsidies, and grants, helped contain overall spending. However, these savings were partly offset by increases in debt servicing costs, wages, and social benefits, reflecting ongoing fiscal commitments. Capital expenditure also declined, driven by reduced investment in non-financial assets, although this was partially balanced by higher capital transfers.

Overall, the data suggest that The Bahamas’ economy continues to benefit from strong tourism-driven activity, while fiscal pressures and structural constraints present ongoing challenges to the sustainability of growth.

Source: (Central Bank of the Bahamas)