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Gambia economic growth drops as global economy nosedives

Feb 1, 2012, 12:41 PM | Article By: Osman Kargbo

Latest report by the Central Bank of The Gambia indicates that the 5.5 per cent and 6.7 per cent economic growth rate registered by The Gambia in 2010 and 2009 respectively could not be attained by the nation in 2011.

Growth rate by The Gambia slightly dropped to 5.4 per cent in 2011, the CBG quoted data from the Gambia Bureau of Statistics as indicating.

In the quarterly Monetary Policy Committee report released to the press yesterday at the Central Bank conference hall in Banjul, CBG Governor Amadou Colley highlighted IMF’s latest World Economic Outlook, which states that global growth is forecast at 3.25 percent in both 2011 and 2012, down from the earlier projection of 4.3 per cent and 4.5 per cent respectively.

“Although growth in emerging and developing economies remains robust,” Governor Colley said, “it is expected to moderate somewhat due to contagion from the European crisis as well as policies aimed at curbing domestic demand pressures.”

Giving an analytical report of the factors at play in the current economic status of the country, the Central Bank Governor said agricultural output grew at a slower pace of 4 per cent in the year under review compared to 12.1 per cent in 2010.

Industry value-added is estimated at 1.3 per cent, lower than the 2.6 per cent in2010 attributed to the decrease in the output of mining and quarrying and electricity, gas and water to 1.6 per cent and 1.4 per cent from 14.2 per cent and 7.7 per cent respectively in 2010.

Manufacturing value-added rose to 3.9 per cent from 0.4 per cent in 2010. Construction output shrank by 2.9 per cent on top of the contraction of 3.7 per cent in 2010.

Services value-added grew by a robust 8.5 per cent, significantly higher than the 1.2 per cent in 2010.

“All the services sub-sectors grew strongly with the highest growth rates recorded by communication (14.0 per cent) and wholesale and retail (9.7 per cent),” said Governor Colley.

According to the MPC report, broad money increased by 11.0 per cent in 2011, lower than the 13.7 per cent in 2010 and the target of 13.1 per cent.

Of the determinants of broad money, the net foreign assets (NFA) and the net domestic assets (NDA) of the banking sector grew by 13.1 per cent and 10.1 per cent compared with 3.9 per cent and 19.0 per cent respectively in 2010, the CBG Governor said, adding that reserve money, the Bank’s operating target, increased by 12.3 per cent, higher than the 10.5 per cent in 2010 and the target of 5.0 per cent.


Provisional data, according to the MPC report, indicate an improved Government fiscal position in 2011.

Report represented by Governor Colley states that revenue and grants increased to D5.2 billion (16.1 per cent of GDP), higher than the D5.0 billion (17.1 per cent of GDP) in 2010.

Domestic revenue, comprising tax and non-tax revenue, rose to D4.2 billion, or 6.9 per cent. Tax receipts amounted to D3.7 billion of which D1.8 billion was on account of international trade taxes. Non-tax revenue also rose to D499.6 million, or 7.4 per cent.

On total expenditure and net lending, Governor Colley said this amounted to D6.1 billion compared to D6.0 billion in 2010. Current expenditure totaled D4.4 billion, or an increase of 13.3 per cent. “In contrast, capital expenditure contracted to D1.7 billion, or 20.8 per cent from 2010,” the bank governor noted.

He therefore said: “The overall budget balance, including grants, was a deficit of D910.0 million (2.8 per cent of GDP), lower than the D1.04 billion (3.5 per cent of GDP) in 2010.

“Preliminary balance of payments estimates for the first three quarters of 2011 indicate an overall surplus of US$20.1 million, lower than the US$52.5 million recorded in the corresponding period of 2010.”

The current account, according to the CBG Governor, is estimated at a surplus of US$38.3 million, higher than the surplus of US$17.7 million in the first nine months of 2010, while the capital and financial account balance registered a deficit of US$18.2 million relative to the surplus of US$34.8 million in the corresponding period in 2010.

As at end-December 2011, the gross international reserves of the Central Bank of The Gambia was US$182.50 million, equivalent to 5.1 months of import cover, the MPC report states, adding: “Activity in the domestic foreign exchange market continued to be vibrant, despite the contraction in the volumes of transactions in 2011. In the year to end-December 2011, volume of transactions totaled US$1.43 billion, lower than the US$1.67 billion in 2010.


The Dalasi, though broadly stable, depreciated against all the major currencies, the CBG report says.

“As at end-December 2011, the Dalasi weakened against the US Dollar by 7.7 percent, Pound Sterling (6.9 per cent) and Euro (8.8 per cent) from December 2010,” the report says. “In nominal effective exchange rate terms, the Dalasi weakened by 6.5 per cent, higher than the 1.9 per cent in 2010.”


The report also stated that, according to key financial soundness indicators, the Gambia’s banking sector remains sound. The average capital adequacy ratio decreased slightly to 25.4 per cent in 2011 from 25.9 per cent in 2010, but was significantly higher than the minimum requirement of 10 percent.

Total assets increased to D18.7 billion (64.0 per cent of GDP), or 5.3 per cent from 2010. Gross loans and advances, accounting for 29.2 per cent of total assets rose modestly to D5.45 billion (18.7 percent of GDP), or 3.1 per cent. The non-performing loans ratio decreased to 12.9 per cent, lower than the 14.5 per cent in 2010.

“The industry remains highly liquid,” the report says, adding that the liquidity ratio was 70.3 percent compared to 69.8 per cent in 2010 and higher than the minimum requirement of 30 per cent.

Treasury bills holdings accounted for 67.3 per cent of the liquid assets. Deposit liabilities rose robustly to D12.4 billion, or 10.2 percent from 2010.

“The industry’s profits totaled D12.2 million compared to a loss of D17.7 million in 2010,” the report noted, saying the return on equity and return on assets was 3.0 percent and 0.3 percent compared to 1.8 percent and -0.5 percent respectively in 2010.INTEREST RATES EXPECTED TO BE REDUCED

Considering the current indicators of the national economy, including the inflation outlook and the lack of demand pressures from the slowing of the domestic economy, the MPC has decided to reduce the policy rate by 1.0 percentage point to 13 percent. “The expectation is that other interest rates, particularly lending rates, would be reduced,” Governor Colley said.