Domestic Economic Developments in The Bahamas

The Central Bank of The Bahamas -Monthly Economic and Financial Developments (MEFD) May 2025

Published: Monday June 30th, 2025

Domestic Economic Developments

Overview

Preliminary indications are that the domestic economy’s pace of growth moderated during May 2025, relative to the same period last year, as performance continued to move closer to their expected medium-term potential.  Tourism inflows, although at healthy levels, rose at a slower pace, owing to capacity constraints in the high value-added stopover category, albeit the cruise sector remained buoyant.  In price developments, average consumer price inflation posted a flat outturn during the 12 months to March 2025, relative to the comparative 2024 period, underpinned by reduced cost pressures from imported fuel and other goods and services.  Monetary sector developments featured a buildup in banking sector liquidity, as the accumulation in the deposit base exceeded the growth in domestic credit.  In contrast, external reserves decreased, mainly attributed to a rise in net foreign currency outflows through the public sector.

Real Sector

Tourism

Initial data indicated that during the review month, the gains tourism sector earnings slowed, as activity in the stopover segment remained constrained by accommodation capacity.  However, the cruise segment maintained its healthy pace of growth.

Preliminary data from the Nassau Airport Development Company Limited (NAD) revealed that total departure—net of domestic passenger—declined by 3.2% to 133,397 in May, relative to the same 2024 period.  Underlying this outcome, U.S departures fell by 3.7% to 113,984, and non-US international departures, by 0.6% to 19,413, vis-à-vis the corresponding period last year.

On a year-to-date basis, total outbound traffic decreased by 2.3% to 0.7 million.  Specifically, U.S departures reduced by 2.8% to 0.6 million, relative to the comparative 2024 period.  Contrastingly, non-US departures grew by 0.7% to 0.1 million compared to a year earlier.

In the short-term vacation rental market, data provided by AirDNA showed that in May, total room nights sold rose by 5.0% to 66,830 vis-à-vis the corresponding period in the prior year.  The average daily room rate (ADR) firmed for entire place listings by 10.4% to $571.89 relative to the comparative period of 2024, and by 1.3% to $189.16 for hotel comparable listings.  However, given the inventory boost, average occupancy rates for entire place listings decreased to 44.1% from 47.3% a year earlier.  Likewise, hotel comparable listings declined to 43.5% from 47.7% in the preceding year.  On a year-to-date basis, total room nights sold grew by 10.7% and the average daily rates on entire place and hotel comparable listings, by 8.6% and 3.6%, respectively.

2025/2026 Budget Communications Highlights

The Government’s Budget Communication for FY2025/2026 was presented to Parliament on May 28, 2025 under the theme “Expanding Opportunities, Island by Island”, and approved by the end of June.  The Government’s announced an agenda aimed at prioritizing enhanced food and national security, offsetting the rising costs of living, upgrading public infrastructure, protecting the environment and advancing education and employment.

In the 2025/26 Budget, the Government plans to strengthen its fiscal position by improving revenue collection efficiency to counterbalance a targeted tax relief strategy.  In this regard, the budget forecasts a revenue intake of $3.9 billion for FY2025/26, compared to the projected $3.5 billion in FY2024/25.

With regard to revenue measures, no general increase in taxes nor fees were scheduled for FY2025/26.  Measures to increase tax proceeds largely focused on enhancing collection efficiency, and bolstering tax compliance.

Heightened efforts concentrated on strengthening tax compliance from cruise liners.  Measures to improve collection efficiency include the introduction of the Frequent Visitors Digital Card (FVDC) initiative, aimed at expediting the immigration process for frequent leisure travelers arriving by private vessel or aircraft.

To increase non-tax proceeds, the Budget introduces a series of targeted fees to protect the marine environment, such as an environmental levy on seabed leases and fines for unsafe marine operations.  In addition, the Government foreshadowed the establishment of a Maritime Revenue Unit to support compliance, with expanded enforcement powers granted to relevant authorities.

Further, the Government outlined a series of tax relief measures to offset rising living costs.  Notably, a reduction in the VAT rate to 5.0% was announced for a range of essential products, such as medical and dental supplies, prescription and non-prescription drugs, and basic hygiene products.  In addition, concessions included the extension of VAT relief on building materials for religious institutions, the planned reduction or removal of customs duties for several household hardware items, and the elimination of excise duty on butane fuel used for cooking. To encourage the adoption of cleaner technology, the budget also offered duty exemptions for energy efficient appliances.

Aligning with the Government’s goal to create employment opportunities, the Budget introduced the Business Development Incentives Program Act to offer tax-related benefits to large firms investing in local job creation, training, and sustainable development.

To promote equity in the Real Property Tax system, Parliament approved that, foreign homeowners would qualify for the owner-occupied exemption on properties valued up to $300,000, with partial exemption granted after 90 days of residency and full exemption after 183 days.

As it pertains to Government spending, expenditure was projected at $3.8 billion for FY2025/26, surpassing the $3.6 billion estimate in FY2024/2025. Recurrent outlays were expected to reach $3.4 billion, vis-à-vis the $3.3 billion approximation in FY2024/2025. Capital spending was forecasted at $376.3 million, higher than the $344.5 million estimate in 2024/2025.  With regard to major expenditure measures, the Government outlined numerous planned infrastructure projects across the archipelago, inclusive of roadworks, school and clinic repairs, aviation enhancements and expansions, upgrades to water systems and improving drainage in flood-prone areas.  As it relates to public safety, the Budget included allotments to enhance emergency services infrastructure.  The Government also provisioned funds for the upgrade of law enforcement technology, the construction of new facilities and for new recruits.  For the judicial system, the Budget allocated funds to expand the Virtual Courts platform.

Targeting food security, the Budget increased the overall agriculture allocation to $35.0 million from $25.0 million. Notably, the Government planned to raise its commitments to Bahamian farmers and provision for the creation of a new Centre for Food and Nutrition Security, to drive innovation, research, and policy development.  In addition, $9.0 million was earmarked to outfit the Golden Yolk Project with new poultry housing and an egg processing facility.  Further, the Government signaled plans to support construction of hydroponic farms on several islands to modernize farming techniques.

In terms of entrepreneurship, the Government proposed allotments for targeted programs through the Small Business Development Center and the Bahamas Development Bank. For education, proposed investments include $2.6 million for the National Maritime Academy, expanded support for BAMSI and BTVI, and scholarships for university students.  Further, the Government provisioned for the launch of The Bahamas Polytechnic Accreditation and Training Hub, alongside the Upskill program, to strengthen technical and vocational pathways through paid online and in-person certification courses.

Based on the current economic outlook, the Government anticipates a fiscal surplus of $75.5 million, or 0.5% of GDP for FY2025/2026, as compared to the projected $69.8 million deficit (0.4% of GDP) for FY2024/25. Given the projections, a reduction in the direct debt charge was forecasted, alongside a decrease in the corresponding ratio to GDP.

Prices

Average consumer price inflation—as measured by the All-Bahamas Retail Price Index—was relatively flat during the 12 months to March 2025, following a 2.4% increase in the comparative 2024 period.  Contributing to this development, average costs declined for clothing & footwear, by 1.9% and housing, water, gas, electricity & other fuels, by 1.3%, after recording respective increases of 0.2% and 4.7% in the same period last year. Likewise, average prices decreased for recreation & culture, by 0.6% and restaurant & hotels, by 0.3%, following the prior year gains of 1.7% and 3.4%, respectively.  In addition, average inflation moderated for furnishing, household equipment & routine household maintenance (2.7%); food & non-alcoholic beverages (2.4%); miscellaneous goods & services (2.3%); alcoholic beverages tobacco & narcotics (1.8%); education (1.7%); and health (1.7%). Providing some offset, the reduction in average prices slowed for communications (3.5%) and transport (1.6%).

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The Labour Market, Employment and The Strength of The Bahamas Economy

Employment and the Labour Market in The Bahamas

The job market in The Bahamas should be more occupied with Bahamian labor than foreign ones, and the Bahamian middle class must be reinforced to make The Bahamas more economically balanced

By Jamal Moss
Nassau, The Bahamas

The challenges of Bahamian labor markets comprise various complex issues that affect the strength of its economy.  This article delves into one of the issues that is critical - measures to build up the middle class in the wake of taxation and inflation.  Thus, this issue is noted, and corresponding gradual commonsense changes are suggested, considering the nature of the Bahamian labor market and possible directions for its development. 

Strengthening the Middle Class

The current economic climate shows that the middle class faces hardships as taxes and inflation rates continue to rise in The Bahamas.  These costs, such as housing, medical care, food, and other essentials, burden middle-income earners and slow their income growth.  Increased taxes for middle-income earners and small business owners intensify the financial challenges.  The government needs to enact policies that reduce the tax burden, tame inflation, encourage the construction of affordable housing for its population and solve the problem of rather costly health care.

Offering tax credits for small businesses, decreasing barriers to underestimating small companies, and assisting development in the middle class contribute to the economy's steady growth.

Solutions

1. Prudent tax incentives are required to lower critical costs for middle-income earners and small businesses.  Broadening the base means decreasing the VAT rates on food and other necessary products and services that affect citizens' daily lives. 

2. Support in the form of tax credits for homeownership and education costs can further ease the burden on family spending and make more provisions for their future.  Further, tax incentives for small businesses will ensure that they operate, thus creating employment opportunities for the country’s citizens.

3. An affordable housing project is needed so that more middle-income earners can own houses.  The price for constructing affordable housing projects can be lowered through government grants or by providing soft loans for first-time home buyers.  Success in mortgage approval and a decrease in down payments shall continue to ease homeownership.  It also helps with the stability and financial side of the family.  It also helps with the economy, not to mention the expansion of home builders and services that result from the increase in home construction.

4. The general welfare of the income earners will need to address issues that affect inflation and, consequently, the cost of living.  Sherman (2022) states in the Nassau Guardian that there is a possibility of maintaining stable prices and thus avoiding inflation by controlling and setting the prices of the goods and services necessary for the population.  Simplifying the expected price range with the help of introducing ceilings or floors for prices for foodstuffs, medications, and utilities can make the profile more affordable.  Measures, such as removing VAT off medical services, will reduce healthcare costs and reduce pressure on the financial burden.  It will improve local production, reduce importation, ensure the stability of prices, and create employment opportunities through the grants, loans, and venture and technical support that will be rendered to the business.

Awareness creation among members of the public in these areas of financial management, investment, and the available government assistance will equip middle-income earner families with the knowledge and thus help them be in good standing to face the present economic challenging hard times.

Conclusion

The brain drain issue should be addressed continuously and practiced to achieve justice.  The job market should be more occupied with Bahamian labor than foreign ones, and the middle class must be reinforced to make The Bahamas more economically balanced.  By funding education, implementing sound policies and policies, and deploying other specialized measures, employment in The Bahamas can be made to serve the interests of all its citizens.  A detailed planning process integrated with stakeholders can ensure that progressive improvements are brought to enhance the online education system, hence improving economic growth and security.

The Bahamas National Trade Policy Instituted

With the launch of the National Trade Policy, The Bahamas now has a comprehensive framework for trade that the government intends to use to lower the trade deficit by empowering more local businesses to tap into export markets.

Speaking at a press conference held on Thursday, 25 May, 2023 to announce the launch of the nation’s first-ever National Trade Policy, Bahamas Trade Commission Chairman, Philip Galanis, said that trade is expected to play a big role in the Bahamian economy as the nation continues its post-pandemic recovery.

“Prior to the pandemic, the export of services, particularly tourism related services, served as a counterbalance to our food and goods trade deficit.  However, moving forward we are seeking to expand existing areas of strength and diversify into new areas to create new trade opportunities for local businesses and more resilient national economy.”

With the launch of the National Trade Policy, Chairman Galanis indicated that country finally has a coherent approach to the development of trade in alignment with wider national development plans.  He stated that the policy is “comprehensive and with broad impacts on the Bahamian economy.”

“This Policy speaks to more effective management of imports through reviewing our tariff structure, the need for competition laws, domestic preferences, and improved incentive schemes.  It addresses how we will expand existing exports through our trade promotion efforts and development programmes, a full review of the existing tax regime, the embracing of digital technology, and the development of free trade zones.”

“Through this Policy, The Bahamas will diversify its exports in target areas within the blue, green, and orange economies, while strengthening our domestic competitiveness through the creation of more service-oriented, faster processes combined with greater education and support for local businesses.”

Chairman Galanis credited the extensive consultation process done over the past two years with local businesses, trade experts, and other stakeholders for the comprehensiveness of the Policy.

“We have held numerous formal and informal sessions with local businesses of all sizes and in all relevant industries, securing vital stakeholder input that played a big role in the crafting of the policy.  The document we have today reflects that input, as well as the inclusion of input from top local and international experts.  As a result, we have developed a trade framework that addresses local needs and is responsive to global demand.”

Moving forward, Mr. Galanis encouraged all local businesses who are interested in participating in international trade or expanding the extent of their trade activity to reach out to the Trade Commission to learn more about the Policy and upcoming opportunities for enrichment.

He also welcomed all industry stakeholders to continue to work collaboratively with the government as the policy is rolled out, so that all initiatives continue to reflect the needs and input of Bahamian businesses.

“Most trade is conducted by businesses, not the Government, and affects the lives of the Bahamian people, so it will take the joint efforts of both the Government, as well as the private sector, to truly encourage economic diversification in the country.  I encourage you all to take an interest in trade and to learn more about the importance of trade to helping us building a stronger economy.”

Those who wish to learn more about the National Trade Policy can download a copy of the policy at https://moea.gov.bs/the-bahamas-national-trade-policy.

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