Central Bank of the Bahamas reports continued first-quarter growth as inflation pressures rise

The Central Bank of the Bahamas published its review of domestic economic and sectoral developments for the first quarter of 2026, reporting that the economy maintained growth broadly in line with the same period a year earlier. Growth indicators continued to move closer to medium- to long-term potential after the post-pandemic recovery, with tourism supported by strong sea arrivals and improving higher value-added air activity, while small and medium-scale foreign investment projects supported construction. Inflationary pressures increased, reflecting the pass-through of higher global oil prices to imported oil and other goods. The review also noted a lower government budget surplus in the third quarter of FY2025/26, as expenditure growth exceeded revenue gains, with financing sourced mainly from the domestic market through long- and short-term debt instruments. Bank liquidity expanded as deposit growth outpaced domestic credit, net foreign assets rose on foreign currency inflows, and credit quality improved. Bank profitability weakened in the fourth quarter of 2025, the latest available period, due to higher operating costs and increased bad debt provisions. The current account deficit widened on a larger merchandise trade deficit and higher primary income deficit, while financial account inflows increased due mainly to reduced portfolio investment outflows and higher direct investment inflows. The report includes a review of 2025 financial services activity, finding moderate expenditure-driven growth in the sector’s contribution to the economy. International banking and trust activity continued to consolidate amid evolving compliance standards and supervisory requirements, while domestic intermediation strengthened across banks, credit unions and insurance companies. Employment growth remained constrained by operational efficiency initiatives, digital transformation, restructuring and regulatory adjustments.