By CANDIA DAMES, Guardian News Editor

There will likely be a slowdown in government revenue collections in the coming months, according to the Central Bank of the Bahamas, which says in a newly released economic report that fiscal operations could be adversely impacted as a result.

The report came days after the Bank issued a statement Monday night urging Bahamians to hold back on spending and avoid taking on additional debt.

Recently, Prime Minister Hubert Ingraham told The Nassau Guardian that the government is monitoring its revenue projections for the first two months of the fiscal year 2008/2009, which he said were slightly behind forecasted levels, although holding firm compared to the same period last year.

"It's too early yet to make any definite decision on a revision of our revenue projects,"

he said at the time.

The government has projected that it will collect $1.6 billion this year, and Ingraham earlier outlined measures intended to "further bolster the buoyancy of our revenue system."

But a financial crisis in the United States has already had a negative impact on current economic conditions locally, according to officials.

And the expectation is this situation will get worse before it improves.

With U.S. confidence remaining near historic lows and households making further adjustments in response to the significant erosion in financial wealth, demand for tourism is expected to wane further over the remainder of 2008 and the first half of 2009, added the Bank.

"The deepening of the global financial crisis, underscored by the collapse of the subprime lending market in the U.S. has increased the short and medium term uncertainties facing the Bahamian economy," said the Bank, reiterating a point it made in its earlier statement.

But it said continued weakness in the U.S. currency could offer some competitive gains for The Bahamas relative to non-dollar priced tourist destinations.

And construction activity is expected to ease despite steadied support from domestic financing. The further slowdown, according to the Bank, will occur as a result of reduced stimulus from foreign investments that are impacted by the global contraction in supply of credit and the diminished ability of some investors to sustain their equity support for these projects.

In terms of inflation, the report added, expectations are that the rate will stay elevated in the near term, as the weak dollar reduces prospects for any significant fall back in oil and commodity prices.

The Bank said inflation rose to 4.7 percent in August, 30 basis points higher than the previous month's rate, due to higher gas and electricity bills.

It added that average consumer prices for the 12-month period ending July increased to 3.29 percent from 2.42 percent in the corresponding period of 2007 and 1.58 percent in 2006.

The Central Bank said, "In this uncertain environment, domestic demand should remain relatively subdued and support sustainable trends in external reserves and bank liquidity."

The report said economic data for August highlighted continued moderation in the economic momentum, reflecting a slowdown in the expansion of consumer demand, tempered construction activity and sustained weakness in the tourism sector.

"Bouyed by a contraction in private sector credit growth, along with public sector borrowings, liquidity conditions improved during the period, and external reserve levels stabilized," it added.

Tourism statistics for the first half of the year showed a 2.2 percent contraction in arrivals to 2.37 million compared to the same period a year ago.

This development, according to the Central Bank, reflected a 3.8 percent reduction in sea passengers, which outpaced the 1.1 percent improvement in air traffic.

Both New Providence and Grand Bahama experienced declines in visitors of 5.9 percent and 14.7 percent respectively, whereas arrivals to the Family Islands strengthened by 11.7 percent, the report said.