Ministry Releases MidYear Economic Review

August 21, 2014

[Updated with PLP response] Saying it is in “accordance with Government’s commitment to effect ongoing improvements in transparency and it’s reporting on the fiscal and economic affairs of the country,” the Ministry of Finance today [Aug 21] reported on the 2014/15 First Quarter Fiscal Performance and provided a Mid-Year Economic Review 2014.

2014/15 First Quarter Fiscal Performance:

The headline numbers for the 2014/15 National Budget were: a revenue target of $902 million; current expenditure of $1.1 billion, including debt service; capital expenditure of $61.9 million; and a projected deficit of $267.3 million.

Revenues for the first quarter ending June 2014 are $214.8 million; this is $4.8 million [2.3%] higher than in June 2013. The primary reason for this increase is due to stronger Other Revenue collections and this increase resulted in additional revenue of $4.2 million.

Payroll Taxes to date are approximately $1.6 million above 2013 collections while stamp duty collections are $1.4 million higher than 2013. These increases more than offset $1.6 million and $1.4 million reductions in Customs Duty and Land Tax, respectively.

Actual revenues are tracking in line with budget estimates.

Current expenditures, excluding debt service, for the first three months ending June, 2014 are $229 million; this is $18.3 million [7.4%] lower than was spent during the same period last fiscal year.

Government current account spending to date is lower during this fiscal year when compared to the same period last year due mainly to the furlough arrangement and other budget reduction measures taken in the 2014/15 Budget.

Capital expenditures for the period ending June 2014 are $8.4 million lower than in June 2014. This is primarily due to the requirement to make additional expenditures for the Heritage Wharf in the prior fiscal year.

Total current and capital spending to date, excluding debt service, is $ 26.6 million lower than last year’s spend. Debt service costs for the first three months ending June 2014 are $40.3 million.

This represents $28.4 million in interest payments and a $11.9 million contribution to the Government Borrowing Sinking Fund, representing one quarter of the $47.7 million annual contribution.

Debt service to date is $7.1 million more than last year’s period. This is due to a higher debt levels.

In general, current expenditures are presently tracking on par with 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.

For the first three months of 2014/15 Government incurred a deficit of $63.8 million. In the first quarter of fiscal year 2014/15 Government paid off $120 million in Private Placement Notes. On June 30th, 2014, central Government gross debt, excluding guarantees, stood at $2.185 billion.

Bermuda Economy 2014: Mid-Year Economic Review

  • The half-year to date [June] average Consumer Price Index was 1.9%, with the 12 month average rate tracking slightly lower at 1.8%. The primary contributors to inflation during the last six months were a 5.9% increase in the Health & Personal Care sector, rising food costs of 2.9% and Clothing & Footwear sector which increased by an average of 1.9%.
  • Imports decreased by 6.8% in the first quarter of 2014, versus the same period in 2013,to register at $219 million. The decline was primarily attributed to the imports of fuel which fell $20 million below the corresponding period of 2013, as well as declines in the imports of food, chemicals and machinery.
  • Total visitor arrivals, for the first half of this year, were up 4% versus the previous year. This was mainly due to a combination air arrivals decreasing by 2% in the first two quarters, and cruise ship arrivals increasing by 9% over the same time period in 2013.
  • A total of 535 new international companies and partnerships were registered in Bermuda during the first six months of 2014 representing a 13.4% increase over 2013registrations of 472.
  • Total value of new construction projects started in the first quarter of this year increased to $10.0 million, or up 26.3%, from to $7.9 million in 2013.
  • The estimated value of construction work put in place was $56.2 million, an increase of 22.2%. This increase can mainly be attributed to the redevelopment of both the Fairmont Hamilton Princess and the Pink Beach Hotel.
  • Employment income in the first quarter of 2014 contracted slightly to $892 million, a decrease of 0.3%. The Public Administration & Defense [-10.2%], Wholesale & Retail [-6.1%], Business Services [-5.2%] and Banking, Insurance & Real Estate [-4.7%] industries were the main contributors to the contraction. However, the Construction and International Business industries were bright spots as they registered increases in employment income of 9.2% and 6.6%, respectively.
  • Total retail sales for the first six months of 2014 rose by 0.9% or $4.5 million to register at $491.4million. The positive sales growth can mainly be attributed to increased sales growth in car and motorcycle sales [up 32% versus June 2013].
  • Bermuda’s Balance of Payments in the first quarter of 2014 recorded a surplus on the current account of $225 million, which represented an $11 million decrease from the $236 million surplus in the first quarter of 2013.
  • Based on figures released by the Bermuda Monetary Authority, Bermuda’s money supply contracted by 5.1% year over year at the end of the first quarter 2014. The money supply declined mainly due to a 5.1% reduction in bank deposit liabilities. The majority of the decline in deposits was the result of lower time deposit balances which fell by 9.05% during the quarter versus the same quarter the previous year.
  • The balance sheets of local banks contracted in the first quarter of 2014 as loans and advances decreased by BD$204 million or 2.4% versus the previous quarter and BD$499 million or 5.8% versus the first quarter of 2013. Although customer deposits were down by BD$838 million or 3.8% versus the previous quarter, year-on-year, total customer deposits increased by BD$1.6 billion or 7.9%.

Commenting on the report, Deputy Premier and Minister of Finance Bob Richards said: “Economic data for the first quarter of this year are consistent with our expectation that the economy is slowly starting to move in the right direction .

“While there are some modestly positive signs in the economy, there is still a lot more work that needs to be done in order to improve overall economic conditions.

“The Ministry expects that the initiatives outlined in the 2014/2015 Budget Statement, as well as other future initiatives, will be the catalysts that lead to improved economic conditions in the medium-term.”

Update 7.17pm: Shadow Minister of Finance David Burt said, “The OBA seems content to release cookie cutter press releases on a quarterly basis in an attempt to make Bermudians believe that things are getting better. None is more evident than this press release in which the document sent by the Ministry was dated February 21, 2014.

“Though the Minister is anxious to convince Bermudians that retail sales are on the rise – when accounting for inflation the volume of retail sales have decreased, not increased as Minister Richards would have you believe. This release shows that prices for staples items are increasing faster than incomes which means that Bermuda’s standard of living and quality of life are getting worse under the OBA.

“Bermudians understand that they are worse off under the OBA, and the OBA’s lack of a plan to grow the Bermuda economy is becoming more obvious as local companies continue to fail and more Bermudians become unemployed.

“The OBA need to get serious about economic diversification; move swiftly on ideas that can create high quality local jobs like online gaming; and look to attract new physical presence companies to Bermuda via the Bermuda Fund which the PLP called for in our Budget Response.

“Recycled OBA press releases talking “turnaround” is not what Bermuda needs; Bermuda needs bold leadership with a vision for the future, and the OBA is failing on that measure as they only offer tired ideas from that the last century which will not position Bermuda for a changing world.”

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Comments (22)

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  1. Crab Mentality says:

    Good job OBA!

    Thank you for making me worry less about my home’s future.

  2. Raymond Ray says:

    Have you wondered why Senator David Burt has the titled “Junior Minister of Finance”?
    Personally I believe he should cease attempting to be that stick in the spokes of progress. The Gibbons family have handle finances for, well we’ll just say “quite a long time” and I think they by far Bermudas best choice when it comes down to taking advice from if it concerns dollars or any other currency.

    • Hmmm says:

      Burt ignored the report and played politics. perhaps Burt is not up to the job if junior minister or shadow minister.

      Great job so far Bermuda and OBA

  3. justin says:

    Sssshhhhhhhh Mr. Burt, class is in session. You will learn a lot more if you sit back and listen instead of disrupting everyone. Continue on with the good progress Mr. Richards!

  4. Sad says:

    Interesting that Mr Burt pretended like the part on improvement on Government finances was not included in the press release.

  5. lucky 7 says:

    Thanks Uncle Bob and OBA! Keep up the good work.

  6. Ronnie says:

    Mr. Burt’s response proves once again that the facts have no bearing on what he and his party colleagues choose to say. One could be fooled into thinking that they actually believe their own statements. The last thing the PLP wants to see is any sort of improvement in Govt finances.

  7. JustAskin2 says:

    Employment income. This is what I honed in on: “Public Administration & Defense [-10.2%], Wholesale & Retail [-6.1%], Business Services [-5.2%] and Banking, Insurance & Real Estate [-4.7%] industries were the main contributors to the contraction. However, the Construction and International Business industries … registered increases in employment income of 9.2% and 6.6%, respectively.”

    According to this report, there were decreases everywhere except construction and IB, areas in which it appears the most foreign workers are hired. Very interesting, reading between the lines.

    • JB says:

      Sort of proves that IB and foreign workers are vital to the economy of Bermuda right?

  8. Trulytruly says:

    This shows some financial discipline being applied by the OBA. Rather different than the previous government. Keep on track Bob!

    • jt says:

      Indeed…figures that are in line with a budget…nice to see after so long adrift. This is the first step to recovery…now revenue must begin to exceed expenses.

  9. Strike fund says:

    So govt has cut spending and increased revenue but the inherited debt continues to grow.

    I think most people understand that a govt with Bob Richards in charge of the purse strings is a must for the foreseeable future, regardless of all other party shenanigans.

    I wonder if swizzle sales were as strong as last year.

  10. 32n64w says:

    “Bermudians understand that they are worse off under the OBA, and the OBA’s lack of a plan to grow the Bermuda economy is becoming more obvious as local companies continue to fail and more Bermudians become unemployed.”

    The PLP’s plan to grow the economy was to tax voters thereby taking food off our tables and siphon wages. The very junior ministers’ remarks serve only to confirm the PLP are absolutely bankrupt of ideas, vision and opportunities for Bermudians.

    They have yet to do anything more than whine and complain. Where are their ideas? Where are their solutions? That have NOTHING but verbiage and complaints. Our children offer more input and ideas than their constant winging.

    • RU Kidding says:

      Interesting where you seem to ignore the part where they gave 2 immediate suggestions.

      Guess reading and thinking critically doesn’t fit in with your narrative.

      • hmmm says:

        Need gambling legislation and regulation for online gaming. Won’t create many jobs in Bermuda. Cheaper to do elswhere. That ship sailed years ago.

      • JD says:

        Online gaming and the establishment of a “Bermuda Fund” (from pension funds that we don’t have, so I guess he really means the money tree).

        Yeah sounds like they’ve got it all figured out.

  11. Double Standards says:

    I suggest Mr. Burt read the recently issued. National Training Plan which has received praise from the Unions and Peoples Campaign recently.

    Also, the oassing of the gaming legislation has the aim of spurring hotel development which will provide jobs in the construction and tourism industry.

    The Government is also attempting to spur greater IB with a number of policies that make Bermuda more of an attractive and less hostile jurisdiction to do business in.

    These are some examples of the efforts to grow jobs on the island. Can the PLP please provide estimated numbers regarding jobs that online gaming will provide. Also, what is their thoughts on such an industry being overall detrimental to Bermudas current reputation as a tax haven. Most of our trading partners frown on online gaming due to serious money laundering concerns.

    What about the PLP’s idea of sea bed mining? You know the industry that will put the masses of unemployed sea bed engineers back to work (sarcasm).

    Come on PLP, I know you’re the Opposition, but it doesn’t mean you have to come out swiniging each and every time the Government releases some piece of information.

    Lastly, since the PLP decided to ignore the actual poin t of the release, what do they think on the highlights of Government finances provided in the above? Don’t want to touch that do you? Too much progress being made I guess.

  12. Independent says:

    Well done OBA.
    If the PLP were in charge Bermuda would have sunk by now.

  13. Onion says:

    Amazing. The PLP’s response does not address a single salient fact other than the date of the press release.

    It’s hard for them to face the hard facts when they are the ones who created this mess and then attacked everyone who dared even say that we were in a mess in the first place.

    Time for a new opposition – one that can actually hold the government to account.

  14. Ride says:

    “Update 7.17pm: Shadow Minister of Finance David Burt said, “The OBA seems content to release cookie cutter press releases on a quarterly basis …“”

    Some may call this standard reporting. Why reinvent the wheel if the layout is as you want it. Granted they should have updated the date. However, the issue here is that the public is being informed on a regular basis of the health of the economy supported by the facts collected. Minister Burt has made several claims on the health of the economy but has provided nothing more than his opinion to support those claims. Where is the data to back up his statements?

    I agree with Minister Burt’s comment on providing inflation adjusted percentages. The percentages are misleading without being inflation adjusted. However, he should keep in mind that when his party was in government they did the exact same thing so should temper his indignation.

    Whichever party is the government, the public is best served by highlighting inflation adjusted values. OBA, as you currently hold the reins you have an opportunity to set the standard here rather they following the status quo of all previous governments. What will you do?


  15. jt says:

    Mr. Burt….the release demonstrates financial discipline…you know…the ability to plan a budget and stick to it….which is a necessary step for ..ahh never mind….

  16. Triangle Drifter says:

    While these numbers are nothing to have a party over, they do represent a move in the right direction.

    Think of it this way, The OBA took over the wheel over a speeding car on a green dead end financial highway. We are not off that highway but the OBA has gotten us slowed down just in time to get into the decelleration lane of the last exit.

    Hopefully the brakes are on hard enough to make the turn.