Finance Ministry’s Mid-Year Economic Review

November 14, 2013

The Ministry of Finance today [Nov 14] reported on the 2013/14 first half fiscal performance, saying that both revenues and current expenditures are above budget estimates and the net debt is $1.77 billion.

The Ministry said, “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.

“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.

“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, and in general, current expenditures are presently tracking 2.3% above budget estimates.

For the first six months of 2013/14 Government incurred a deficit of $146.7 million, and debt service costs for the first six months ending September 2013 are $80.3 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.

Commenting on the reports, Minister of Finance Bob Richards 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,” concluded Minister Richards.

The full statement from the Finance Ministry follows below:

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.”

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Comments (22)

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  1. Vote for Me says:

    Please provide a simple chart.

    Columns should be 2013 actual, 2013 budget, 2013 budget vs actual and 2012 actual.

    A written analysis is good but charts are easier to read and understand.

    Charts, like pictures ‘tell a thousand words’.

    • Mike Hind says:

      You know this isn’t the place to submit a request to the Government, right?

      • watching says:

        I’m sure you can tell them! You seem to be their great defender.

        • Mike Hind says:

          Nope. Not even close. But nice try.

          I know anyone that doesn’t toe your party line must be 100% OBA in your mind, but, sadly, it’s just not true.

          Now, back on topic… have you asked them properly for a graph?
          Or is this just another feeble attempt to make the Government look bad?

    • Betty Trump says:

      Thanks Vote for me, I think the OBAubp provided lots of charts pre-election, it would be good for them to continue on such a trend now. The data is often more easier to read, but the devil is in the interpretation of the data that is key. Thanks for putting forward such a great suggestion. But a quick glance suggest not too much progress has been made. Hopefully, all will improve in good time.

  2. Vote for Me says:

    We also need to know how much is left of the $750m that was borrowed and how much interest is being earned on it.

  3. Kareem says:

    Thank goodness the OBA got in.. can you imagine if the PLP won in December.. we wold be flat broke, much more in debt, hiring more Gov workers, urgent care still open losing money, Zane still collecting gov contracts, the wharf still getting repaird from the same person who built it wrong in the first place, the Cog holding up the budget briefcase smiling in her green hat, pretending to know what’s in there, and Rolfe being an MP, more “low cost” condos on south shore.. and on and on and on… scares the color out of me… thank you Bermuda for doing the right thing! I love this country and want it to grow!

    • Portia says:

      Well, from what I can see, we are still flat broke, with no real evidence that the OBA knows how to fix it. Much more in debt? Check – to the tune of $800 million borrowed this year. Hiring more Government workers? Check – just look at the RG job ads every Friday, the OBA has not instituted a hiring freeze, they are still hiring at the same rate as the previous Government, and most of those positions that are advertised are over $100,000 salary. And don’t talk about the wharf, from what I understand, it wasn’t 100% completed when the Breakaway came in May. And if you think only PLP MPs collected Government contracts, think again.

      I guess the more things change…

      • media says:

        Don’t worry SAGE is on it’s way and then you will have plenty to complain about. The OBA know what they have to do. The question is – Is Bermuda ready to take the bitter medicine? The PLP up untili the end never once attempted to tackle the financial state Bermuda was falling into. At least we have a Government that is ready to do it. Can’t wait until the Budget…

        • Betty Trump says:

          The Trojan horse of SAGE< which the OBAubp are hiding out behind, rather than stand up and take responsibility for what they as the government will do anyways.

    • media says:

      The sad part is that there are people out there that actually beleive the opposite of what you write. They haven’t a clue, because if the PLP had got back in, Bermuda would be in a really really bad state. They don’t see that though and that is very worrying.

  4. thief says:

    What a mess!

  5. Half a loaf is better then no loaf!

  6. Kangoocar says:

    Totally agree with Kareem on all his points, also it actually is nice to have the real facts put in front of us by the responsible OBA, the plp thought they were to high and almighty too even tell us anything, yet again I have to be thankful they didn’t because it would have been nothing but miss information and out right lies to cover up their incompetence!!! They must be green with envy that the figures are up now that we have a responsible OBA leading us!!! Just go away and stay there plp and leave it to the professionals!!!!
    Funny there is no comments from the plp talking heads on this??????

  7. Vote for Me says:

    @ Kangoocar
    The analysis is not complete. It needs to clearly show actual vs budget in order for us to assess the results.

    The other big omission is how much of the $800m that was borrowed has not been spent. We also need to know how much interest is being earned on the amount that has not been spent. Can you assist?

  8. Vote for Me says:

    @Kangoocar
    The analysis is not complete – how can you agree with Kareem on all points?

    We need actual results compared to budget in a simple format.

    We also need to know how much of the $800m has not been spent, how much interest is being earned on the unspent amount and who is giving advice on how the money should be invested.

  9. No More Deception/Accountability Please says:

    Funny how we have the new Govt that is underperforming in so many area: not reducing the debt as promised (actually adding to it in the name of ‘things are bad’), increasing expenditures, and squeezing it’s people (customs duty, payroll tax & land tax)for additional revenue. I know someone will say they need more time but if they were honest from the beginning, they wouldn’t have to double speak. If something goes right, they get all the credit. If something goes wrong the deflect the blame (PLP, BHB, BIU, etc.). Can we not give the OBA a free pass because the PLP got it wrong. The best thing to do would be to hold the OBA accountable so that they too don’t get it wrong.

    Take a look at last year’s Throne Speech. How much was not accomplished? Now ask yourself, surely there will be additional items that are not accomplished based on this year’s Throne Speech. Now add that to the many undelivered election promises. Yes, I am talking about the ones that could have been accomplished in 1 year. Actually, the OBA have had the energy to add to what they said they were going to do and haven’t had the decency to do much of what they promised. Two items come to mind: Decriminalizing Marijuana (not a peep mentioned in 2012′s lead up to the election) & reducing teaching hours (actually promised to increase the school day). I am amazed at the lack of outrage on these two items alone. Got to be that coolaid.

    We still have 3 major issues: our young males, racism and our ill equipped work force. It all boils down to what election promises will secure the most votes. For now, I guess we can continue to throw the heavy hand of our penal code at our males, ignore that racism is a surge that has inflicted legacy issues on both sides and that that our work force will magically be ready for the growing demands.

    Now before you get started, I am not a PLP supporter. I actually don’t support any party.

    Oh if our energy could be pooled to bring about what our country needs. No more fighting across the isle but working together to get out of this hole!

    • Media says:

      Don’t worry Sage will be leading the way with the reduction in spending you are so keen on now. You were probably quite happy with the Paula’s justification for not aiming for balanced budgets which led us to right where we are. Can’t wait for the Budget in February. Bob has said it will be a watershed moment for Bermuda. As opposed to you, I think the OBA are doing a good job having been handed an impossible task by the PLP who proved conclusively that they had no idea how to get Bermuda out of the mess they found themselves in.

    • Bermuda Male says:

      Land tax and duty tax was raised under the PLP along with foreign currency purchase tax and payroll tax.

      The OBA simply strengthened the collection processes of these taxes.

      The platform obis sued by the OBA is a five year plan and yet some keep on harping on about broken promises despite being in power less than one year.

      Financial obligations were inherited and must be met. Severe austerity and shirking such obligations would have been irresponsible and harmed the economy much more than it is now.

      Until this Givernment receives four qualified audits on the consolidated fund and numerous AG investigations into financial control breaches, then I am willing to see if they can balance the books. Also, they need to audit the pensions as for some strange reason the PLP stopped auditing this in 2005.

    • Betty Trump says:

      @No More Deception/Accountability Please…..thanks for your comment you have made some very key points. I too look forward to more collaboration, but this only seems to be a buzz word as promoted by the OBAubp.

  10. jt says:

    Speeding freight trains take a very long time to come to a stop.

  11. Bermuda123 says:

    Be interesting to know more on the reduction of work permits? It would be great if that meant Bermudians were taking the jobs, however I feel it may be because jobs are leaving the island still.

    The 3 problems raised by “no more deception” above are right on point, however they could be substantially improved with a real lead from organisations or community leaders outside of Government as they have a high cultural cause. I am the wrong person to lead this (wrong colour, wrong age, wrong accent although Bermudian), but I too love this country and will support the brave person/people who stand up to take that lead. Who is out there????