The Central Bank Of The Bahamas’ Contribution To The
2016-2017 Budget Communication
reductions in the food, beverages and tobacco indices, annual inflation softened by 10 basis
The economic performances of the other major economies were mixed in 2015. In the
United Kingdom, the expansion in real GDP slowed to 2.2% from 2.9%, as the gains in
construction tapered, offsetting the rise in the services sector. In contrast, the euro area ’s real
output growth quickened by 50 basis points to 1.6%, reflecting the sustained improvement in
France—the region’s second largest economy—and tepid recoveries in several southern states
following a period of prolonged recession. In Asia, China’s real GDP expansion slowed by 30
Annex A
points to 0.7% in 2015.
basis points to 6.9%, as the increase in fixed asset investments and exports moderated. In
contrast, Japan’s economy grew marginally by 0.5%, following a flat outturn in the prior year,
supported by gains in Government spending, which outweighed the reduction in consumer
demand.
In light of the softness in economic growth globally, most of the major central banks
either maintained or enhanced their highly accommodative monetary policy stance in 2015.
Specifically, in an effort to provide support to the lackluster euro zone recovery, the European
Central Bank (ECB) reduced its key interest rates on its deposit facility by 10 basis points to a
low of 0.30%, and implemented a monthly €60.0 billion asset purchase programme2, while the
Bank of England retained its benchmark interest rate at the historic low of 0.5% and kept the
size of its Asset Purchase Programme at £375.0 billion. In Asia, the People’s Bank of China
(PBoC) decreased its main loan and deposit rates by 125 basis points each to 4.35% and 1.50%,
respectively, and actively targeted a rise in banking system liquidity through a series of
repurchase agreements.
Further, the Bank of Japan (BOJ) sustained its asset purchase
programme at ¥80 trillion per annum and increased the average maturity of its Government
bond purchases to 7-12 years from 7-10 years. In contrast, given the signs of improvement in
economic and employment conditions, the United States Federal Reserve decided to gradually
reduce the level of monetary accommodation, by raising the target Federal Funds rate range to
0.25%-0.50% from 0.00%-0.25%—the first time in nearly a decade.
The dollar appreciated against all of the major currencies during the year, supported by
the United States ongoing economic growth and monetary policy tightening measures.
Specifically, the dollar strengthened relative to the Canadian dollar, the euro, the British Pound
2
This programme is expected to end in September, 2016.
2
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2016/2017
DRAFT
ESTIMATES
OF REVENUE &
EXPENDITURE