GDP growth projected to contract in 2012

Growth in the Gambian economy has slowed down to 3.3 percent in 2011 compared to 5.5 percent in 2010, revised GDP figures by the Gambia Bureau of Statistics have indicated, according to the Central Bank of The Gambia.

In a statement issued after its Monetary Policy Committee press briefing on Friday, the Central Bank said this is attributed primarily to the contraction in the value-added of agriculture.

Central Bank Governor Amadou Colley, who read the statement, said real GDP growth is projected to contract by 1.7 percent in 2012, but to rebound to 9.7 percent in 2013 premised on improved agricultural output and continued rebound of the tourism sector.

He said monetary developments were characterized by subdued growth of the key monetary aggregates.

Money supply growth, he said, decelerated to 5.8 percent in the year to end-June 2012, significantly lower than 14.9 percent a year ago and the target of 9.0 percent.

Governor Colley revealed that preliminary estimates of government fiscal operations in the first six months of 2012 showed an improved position compared to the same period last year.

“Total revenue and grants amounted to D3.2 billion compared to D2.7 billion in the corresponding period in 2011. Domestic revenue, comprising tax and non-tax revenue, rose to D2.5 billion, or 15.9 percent,” he said, adding that total expenditure and net lending also rose, albeit at a slower pace of 13.0 percent to D3.6 billion.

He stated that the overall budget balance (including grants) on commitment basis, was in a deficit of D418.6 million, lower than the deficit of D469.50 million in the first half of 2011.

“Consequent to the reduced foreign currency inflows and increased demand, the Dalasi depreciated in nominal effective exchange rate terms by 4.7 percent in June 2012 compared to the depreciation of 5.3 percent in June 2011,” he stated.

The Central Bank Governor further stated that against individual currencies, the Dalasi depreciated by 9.8 percent and 6.1 percent against the US dollar and Pound Sterling respectively but appreciated by 3.3 percent against the Euro.

“According to the key financial soundness indicators, the banking industry remains sound. The average risk-weighted capital adequacy ratio (CAR) was 26.0 percent in June 2012, higher than the minimum capital requirement of 10.0 percent,” he explained.

The assets of the industry, Governor Colley added, totaled D19.1 billion, representing an increase of 5.3 percent from June 2011.

Inflation

The Central Bank Governor also told managing directors of banks at the press briefing that the slowdown in global activity has led to a sizeable reduction in commodity prices, although they remain elevated.

“Global food prices have fallen slightly from the historic peak, but the UN Food and Agricultural Organisation indicate that high and unpredictable prices are likely to continue,” he said, adding that average oil prices, the highest on record in 2011, appeared to be heading to new records due to fears over supply disruptions.

On the domestic front, Governor Colley revealed that headline inflation, measured by the National Consumer Price Index (NCPI), declined to 4.3 percent in June 2012 compared to 5.4 percent in June, 2011.

Outlook for Inflation

Governor Colley noted that given the confluence of subdued pace of monetary expansion and the improved fiscal position, coupled with the recent drop in energy and food prices, the MPC expects inflation to remain below the 5 percent target over the remainder of the year and sees the risks to the inflation forecast to be fairly balanced.

Decision

He said taking into account these developments, the MPC views the prevailing condition to be appropriate to further ease monetary policy.

He stated that the MPC has, therefore, decided to reduce the policy rate, the rediscount rate, by one percentage point to 12 percent.