Available indicators. The Bahamian economy continued to expand during the first six months of 2025, but at a slightly moderated speed compared to 2024. This mainly corresponded to more subdued growth in tourism. Otherwise, the economy benefited from sustained foreign investment activity and increased stimulus from private sector credit. The environment is projected to have provided ongoing gains to employment and increased taxable activities which benefited the government's revenue collection.
Stronger credit expansion resulted in reduced seasonal growth in bank liquidity and in external reserves compared to the first half of 2024. Credit risk indicators were also comparatively lowered from 2024, but at a more gradual speed given the tempered pace at which the economy improved. Meanwhile, the inflation rate slowed significantly compared to a year ago due to subsided energy prices and tempered increases in average cost on other imported goods and services.
Foreign exchange market indicators attest to the slower growth in productive activities over the first half of the year. In particular, commercial banks' purchases of foreign currency from the private sector, which are correlated with tourism investments and other activities, rose by 1.3% during January to June 2025 as compared to 2.2% in the first half of 2024. In contrast, sales of foreign currency, in part stimulated by bank lending, expanded by just over 4%, as opposed to a reduction of just over 2% in the same six months last year. This highlighted increased private sector demand on both imported goods and services with lesser amounts paid for fuel imports and travel. As to tourism,
The continued gains reflected a combination of a subdued expansion in stopover receipts compared to a steady and healthy increase in cruise visitor earnings. In the stopover segment, where the bulk of the industry's receipts were recorded, inflows were boosted because of higher average pricing despite a slightly reduced number of visitors. The vacation rental segment contributed notably with an expanded listing of properties supporting a nearly 10% increase in average room sales and further appreciation in average nightly room rates occurring alongside the room sales increase. Challenges overall though reflected constrained hotel room inventory and increased uncertainty in the US markets, which accounts for the majority of the visitors.
As regards the investment climate, indications are that activities continue to be paced by foreign inflows into cruise, destination developments, small-scale, small and medium-scale resort developments, and residential real estates. In addition, strengthened commercial bank lending provided further support to local construction activities via mortgage activities. Returning to the foreign exchange market trends and the outcomes for the external reserves, there was a moderate reduction in the net amount of foreign exchange that commercial banks retained from the private sector and sold to the central bank over the first half of the year. In addition, the central bank made a net sale of foreign currency to the government and public enterprises over this period as opposed to a net purchase of foreign exchange from these entities last year. So correspondingly, we noted that the seasonal growth in external reserves over the first half of the year was more than one-third lower than in the first half of 2024.
As we neared the end of July 2025, external reserves were estimated at $2.95 billion, which was almost about 2% lower than at the same point in 2024 when the outcome had benefited from comparatively healthier tourism growth and some net receipt from the government's external borrowing activities. Summarizing credit trends, domestic banks' lending to the private sector strengthened in comparison to 2024 with increased financing broadly across consumer loans, mortgages, and commercial activities. Likewise, credit risk was further reduced compared to 2024. In particular, the share of private sector loans that were 3 months or more behind in payments was about 5% in June 2025, compared to around about 6% in 2024.
Again though, as the pace of economic improvement reached a more sustainable or steady level, delinquency indicators showed only marginal abatement from the beginning of this year. Most of the year-over-year reduction in the non-performing loan rates occurred during the July to December of 2024 period as opposed to the January to June period of this year. And that period encompasses more or less the year-over-year period for which we're making comparisons.
So turning to the outlook, the central bank continues to expect the economy to grow at a slower pace in 2025 than in 2024. Tourism as the main engine of growth is likely to show mixed trends, in particular with the slowest results being in the US stopover components relative to more sustained expansion in vacation rental receipts, non-US stopovers, and returns from the cruise segment. Despite the contrast though between performance in hotels versus vacation rentals, the central bank's analysis of online travel site and forward-looking bookings and pricing data forecast better hotel sector revenues over the remainder of this year as compared to the second half of last year. And the results last year should be noted were impacted by greater uncertainties around the potential outcome in the US presidential elections as well as disruptions from a relatively busy start to the 2024 hurricane season.
So those factors are not present in terms of gauging the consumer sentiments going into the second half of the year. Nevertheless, the forecast of improved earnings really focus only on the likely improvement in average room rates in the sector without any forecasted uptick in occupancy compared to the same period in 2024. The foreign investment climate is also expected to be stable and along with tourism continue to generate growth in the employment headcount, added to a maintained stronger rate of credit expansion. These trends forecast some possible reduction in bank liquidity and in external reserves, but they offer favorable conditions for improvement in the government's fiscal position.
As we observed from earlier in the year, there are still increased headwinds facing the economy, but these do not extinguish the growth forecast. Uncertainties from increased tariffs on global trade are expected to slow global growth below what would have otherwise been its potential, and this will continue to be a drag on tourism. Any escalation of trade tensions would add to the economic strain of the ongoing wars in the Middle East and Europe. In the meantime, tariffs, supply chain disruptions, and the potential diversion of trade are collectively channeled for increased inflation, which could postpone any anticipated further reduction in international interest rates. And this would keep both public sector debt costlier than it would otherwise have been and it would constrain the ease of funding for foreign direct investment on which our economy depends heavily.
Given the outlook, the central bank will maintain accommodation towards stronger domestic credit expansion, closely monitoring credit risk indicators and the sustainability of foreign exchange market trends to promote stability of both the currency and the domestic financial sector. Questions?
