The Central Bank of the Bahamas has released an update on recent economic developments and prospects, noting that the Bahamian economy expanded during the first half of 2004 with the momentum expected to continue through 2005.

The combination of strong net foreign currency inflows and continued restraint on domestic credit expansion reportedly resulted in a robust seasonal buildup in bank liquidity and external reserves during the first half of the year. As at June 2004, external reserves stood at $651.3 million.

Last month the Bank published its quarterly economic overview, featuring:

• Review of Economic & Financial Developments
• Statistical Appendex
• Gross Economic Contribution of the Financial Sector in The Bahamas

**Regulatory Environment**

This last feature also covered regulatory developments in the sector, with the regulator noting that *”Developments in the regulatory sphere continue to position The Bahamas more strongly for future growth opportunities relative to less functional offshore centres.”*

In 2001 the Central Bank imposed a requirement for all managed or “shell” licensees to establish a physical presence in The Bahamas, by June 30, 2004. The Economic Overview reported that entities having established a physical presence in The Bahamas increased to 216 at year end 2003 from 203 the previous year, with another 29 operations in transition to full physical presence. *“This would be the largest number of entities that have ever maintained a stand-alone presence, placing the sector in a stronger position to generate future employment as balance sheet opportunities expand,”*the report stated.

Ongoing efforts to strengthen the supervisory framework should enhance The Bahamas’ reputation as a safe, well regulated jurisdiction. The Central Bank also sees efficiencies and increased transparency as a result of greater cooperation and exchange of information among Bahamian regulators. In particular, the more comprehensive regulatory framework for the investments funds industry is expected to solidify the jurisdiction’s ability to attract modern investment vehicles, which complement banking sector growth.

The report concluded,*”The jurisdiction is well positioned to build productive capacity, having a highly functional centre with a diverse core of trained professionals, and with tertiary level training facilities to address specific operational needs of the financial sector.”*