Government releases Mid-Year Economic Review

In accordance with Government’s commitment to effecting ongoing improvements in transparency and it’s reporting on the fiscal and economic affairs of the country the Ministry of Finance today reported on the 2013/14 First Half Fiscal Performance and provided a Mid-Year Economic Review 2013

2013/14 First Quarter Fiscal Performance:

The headline numbers for the 2013/14 National Budget were: a revenue target of $871.2 million; current expenditure of $1.1 billion, including debt service; capital expenditure of $84.6 million; and a borrowing requirement of $331.6 million (equal to the projected deficit).

Revenues for the six months ending September 2013 are $436.8 Million; this is $7.6 million (1.8%) higher than in September 2012.  The primary reason for this increase is due to stronger Customs Duty collections and this increase resulted in additional revenue of $10.5 million. Payroll Taxes to date are approximately $2.6 million above 2012 collections while land tax collections are $3.2 million higher than 2012. These increases more than offset reductions in Aircraft Registration Fees, Telecommunication Fees and All Other Fees.

When compared to Budget estimates, revenues are tracking above budget estimates. The primary reason for this growth relates to strength in the collection of Customs Duty and Payroll Tax. Custom Duties are tracking 6% above budget estimates, while Payroll Tax is tracking 2% above budget estimates.

Current expenditures, excluding debt service, for the first six months ending September, 2013 are $487.8 million; this is $10.9 million higher than was spent during the same period last fiscal year.  Government current account spending to date is higher during this fiscal year when compared to the same period last year due mainly to an increase in employer overhead as a result of the Government making its contribution to the Public Service Superannuation Fund which was suspended in 2012/13.

Capital expenditures for the period ending September 2013 are $6.4 million higher than in September 2013. This is primarily due to expenditures for the Heritage Wharf.

Total current and capital spending to date, excluding debt service, is $17.3 million higher than last year’s spend.

Debt service costs for the first six months ending September 2013 are $80.3 million. This represents $42.7 million in interest payments and a $37.6 million transfer to the Government Borrowing Sinking Fund. Debt service to date is $18.5 million more than last year’s period.  Interest expenses are $11.6 million higher than 2012. This is principally due to a portion of the 2012 interest expense being paid from the Sinking Fund in 2012 and also due to the Government’s multi-year borrowing strategy, in which $750 million was raised in July 2013

In general, current expenditures are presently tracking 2.3% above budget estimates. It should be noted that in certain instances expenditures are not made evenly over the year which may distort actual figures when compared to budget.

Due to the ongoing difficult economic conditions, spending pressures have continued in the social areas with increased demand for financial assistance. Expenditures were above budget in the first six months of 2013 also due to spending pressures in the Ministries of Public Works and Tourism Development and Transport.

For the first six months of 2013/14 Government incurred a deficit of $146.7 million.

On September 30th, 2013, central Government gross debt, excluding guarantees, stood at $2.25 billion, $676 million higher than the level at the end of fiscal year 2013. Net debt was $1.77 billion.

Bermuda Economy 2013: Mid-Year Economic Review

Summary Economic Indicators: Mid-Year Economic Review 2013

(*Comparative data over the first half of 2013, except when otherwise indicated.)

• The year to date (September) average Consumer Price Index was 1.8% and the 12 month average rate was also 1.8%. The primary causes of inflation during the last twelve months were increased costs of medical supplies, prescription drugs and health insurance premiums in the Health & Personal Care sector, rising food costs and higher costs for local and overseas tuition in the Education, Recreation & Reading Sector.

• Imports increased by 8.7% in the first two quarter to register at $479.4 million.

• Air arrivals decreased by 0.5% in the first two quarters while the number of cruise passengers fell by 17.6% over the same time period.

• Total visitor spending was down by 2.4% settling at $165.1 million.

• A total of 725 new international companies and partnerships were registered in Bermuda during the first nine months of 2013 representing a 14.7% increase over 2012 registrations of 632. Of the 725 newly registered companies, 15 had a physical presence in Bermuda.

• Total value of new construction projects started fell noticeably from $59.6 million in 2012 to $17.5 million this year.

• The estimated value of construction work put in place was $80.4 million, an increase of 29.9%, which was mainly due to the redevelopment of the hospital.

• Employment income contracted slightly to $1.659 billion, a decrease of 0.8%.

• Total retail sales for the first nine months of 2013 fell by 0.7% or $5.7 million to register at $789.4 million.

• Bermuda’s Balance of Payments in the first half of 2013 recorded a surplus on the current account of $980 million, which was nearly triple the surplus of $357 million that was recorded in the first half of 2012. The investment income account was the largest contributor to the current account surplus.

• Based on figures released by the Bermuda Monetary Authority, Bermuda’s money supply contracted by 1.4% year over year at the end of the second quarter. The money supply has declined mainly due to a 5.4% reduction in deposit liabilities. The majority of the decline in deposits was the result of lower savings balances which fell by 10.6% during the quarter.

• The Banking sector’s total assets decreased by 2.1% at the end of June 2013. The decline was driven mainly by a 6.4% year over year reduction in loans and advances.

• Total investments fell by 3.6% at the end of the second quarter while customer deposits grew by 17.9% for the same time period.

• The number of Standard Work Permits at the end of September fell from 9,863 in 2012 to 9,221 in 2013, a decline of 6.5%.

Commenting on the reports, The Hon. E.T. (Bob) Richards J.P., M.P., Minister of Finance said: “Economic data for the first half of this year are consistent with the expectation in the 2012 National Economic Report of Bermuda that the current difficult economic conditions will persist through 2013.

However, there are some positive signs that certain sectors of the economy are improving as we move towards the end of the year. The Ministry expects that the corrective measures outlined in the 2013/2014 Budget Statement, as well as other future initiatives, will result in improved economic conditions in the medium-term.”

View the Fiscal Performance Chart HERE.