PRESS RELEASE JANUARY 21, 2011
The global recovery is expected to proceed at a more
gradual pace than previously anticipated. In advanced economies,
factors that supported growth such as the coordinated fiscal stimulus
measures are running their course suggesting that the burden of
supporting growth and reducing unemployment will fall
disproportionately on monetary policy. Growth in emerging market
economies is also projected to ease to a more sustainable pace as
fiscal and monetary policies are tightened. However, strong growth in
Asia has underpinned commodity prices, contributing to the stronger
trend in inflation in these countries.
The World Bank projects the global economy to expand by 3.3
percent in 2011 compared to 3.6 percent in 2010. Growth in
Sub-Saharan Africa is projected at 5.3 percent in 2011, higher than the
4.7 percent in 2010.
Rising oil and non-oil commodity prices threaten the global
economic recovery. Crude oil prices rose to an average of US$90 a
barrel in December 2010, the highest in two years. According to the
International Energy Agency, oil prices are expected to remain high in
2011 as the global economic recovery leads to higher demand.
International prices of most agricultural commodities have
increased in recent months at a much faster pace than in 2007/08. The
Food and Agricultural Organisation (FAO) Price Index rose by 34 points
since the previous Food Outlook Report in June 2010 averaging 197
points in October 2010, only 16 points short from its peak in June
2008.
Global inflation has evolved largely as expected.
Reflecting the economic recovery and the rising oil and non-oil
commodity prices, inflation in emerging and developing countries has
accelerated. Inflation in the developed countries, on the other hand,
remains low. The upward pressure on inflation stemming from the
reduction of excess supply in the developed economies has been largely
offset by the easing of labour compensation.
The Gambian economy is projected to grow by 5.5 percent in
2010 reflecting strong growth of agriculture and industry by 14.4
percent and 12.3 percent respectively. The robust growth is expected
to be sustained in 2011.
Growth in the monetary aggregates decelerated in the year
to end-December 2010. Money supply grew by 13.7 percent, lower than
the growth rate of 19.4 per cent in the previous year. Quasi money
increased by 19.3 percent and narrow money by 7.5 percent. Reserve
money, the Bank’s operating target, grew by 10.5 percent, slightly
higher than the 9.3 percent a year ago.
The banking industry is fundamentally sound. The industry
recorded growth in assets, deposits, capital and profits in 2010. Total
assets of the industry increased to D17.8 billion, or 22.7 percent
from 2009. Return on assets was 1.5 percent compared to negative 2.0
percent in the previous year.
Loans and advances, accounting for 29.8 percent of total
assets, increased to D5.3 billion, or 8.6 percent. Credit to
distributive trade increased by 29.3 percent, agriculture (5.7
percent), construction (9.6 percent), fishing (0.4 percent), tourism
(4.0 percent) and other commercial loans (24.4 percent).
The ratio of impaired advances to gross loans and advances
declined modestly to 14.0 percent in December 2010, lower than the 16.2
per cent in September 2010.
Deposit liabilities rose to D11.3 billion (39.8 percent of
GDP) in 2010 compared to D9.48 billion (36.7 percent of GDP) in 2009.
The average capital adequacy ratio increased to 46.3 percent, higher
than the 33.2 percent in 2009 and over and above the minimum
requirement of 8.0 percent.
Preliminary budget estimates indicate that revenue and
grants totaled D4.3 billion (15.2 percent of GDP) in 2010, lower than
the D4.9 billion (19.0 percent of GDP) in 2009, but was 21.2 percent
below the budget estimate. Total expenditure and net lending, on the
other hand, is estimated at D5.1 billion (18.1 percent of GDP) compared
to D6.0 billion (23.2 percent of GDP) in 2009. The overall budget
balance (including grants) on commitment basis was a deficit of D834.6
million (2.9 percent of GDP), lower than the D1.1 billion (4.1 percent
of GDP) in 2009.
Preliminary balance of payments (BOP) estimates for the
first nine months of 2010 indicate an overall surplus of US$77.0
million compared to the deficit of US$32.7 million in the corresponding
period in 2009. Exports and imports decreased to US$117.2 million and
US$173.1 million, or 10.6 percent and 12.2 percent respectively.
The current account surplus, including official transfers,
increased to US$42.2 million, slightly higher than the surplus of
US$41.9 million in the corresponding period in 2009. Similarly, the
capital and financial account was in a surplus of US$34.8 million
compared to a deficit of US$74.7 million in the corresponding period in
2009.
As at end-December 2010, gross international reserves amounted to US$163.5 million, equivalent to 5.1 months of import cover.
The domestic foreign exchange market remains vibrant. The
volume of transactions, measured by aggregate sales and purchases,
increased to US$1.65 billion in the year to end-December 2010 compared
to US$1.49 billion a year earlier.
In nominal effective exchange rate terms, the Dalasi
depreciated by 5.7 percent against a basket of currencies. Against
individual currencies, the Dalasi weakened by 5.3 percent and 1.3
percent against the US Dollar and British Pound respectively but
appreciated against the Euro by 4.7 percent.
The domestic debt increased to D8.7 billion (40.8 percent of
GDP) in 2010, or 18.9 percent from 2009. Treasury bills, accounting
for 67.9 percent of domestic debt, increased to D5.9 billion, or 13.9
percent.
The yield of the 91-day, 182-day and 364-day bills declined
to 10.01 percent, 10.6 percent and 13.18 percent in December 2010
compared to 10.98 percent, 12.91 percent and 14.30 percent respectively
in December 2009.
Data on the maturity structure indicate that the 364 day
bills accounted for 64 percent of the outstanding Treasury bills,
182-day bills (17.1 percent) and 91-day bills (18.9 percent).
According to the readings of the latest Business Sentiment Survey, majority of the
respondents indicated that economic and business activity
were higher in the fourth quarter compared to the third quarter of
2010, but expect inflation to accelerate in the first quarter of 2011
reflecting in large part rising energy and food prices.
End-period inflation, measured by the National Consumer
Price Index (NCPI), was 5.8 percent in December 2010, higher than the
2.7 percent in December 2009. The annual average inflation rate was 5.0
percent relative to 4.6 percent in 2009.
Food inflation increased significantly from 2.9 percent in
December 2009 to 8.3 percent in December 2010. In contrast, non-food
inflation decelerated to 1.9 percent compared to 2.8 percent in
December 2009.
Core inflation, which excludes the prices of energy,
utilities and volatile food items, increased from 2.8 percent in
December 2009 to 5.7 percent in December 2010.
Inflation Outlook
The recent moderation in headline inflation is consistent
with the deceleration in the monetary aggregates and the stability of
the Dalasi. In the near-term, inflation is forecast to remain in
single digit. However, there are risks to the outlook emanating
mainly from cost-push factors such as rising food and energy prices.
Taking the above factors into consideration, including the
inflation outlook, the MPC has decided to leave the policy rate
unchanged at 15 percent.
Central Bank of the Gambia
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