Mr. Saidy Buah, governor of the Central Bank of The Gambia, has stated that the Gambian economy remains resilient, and the outlook is favorable, reporting that the Central Bank’s Composite Index of Economic Activity (CIEA) indicated a stronger-than-expected level of economic activity in the first half of this year.
He told commercial bank managers and journalists on Thursday at Monetary Policy Committee briefing at his office in Banjul, that staff forecast the economy to grow by 5.2 percent in 2022, an upward revision from the 4.7 percent forecast in May 2022.
According to him, this outlook is based on a higher-than-anticipated recovery in tourism activity, private sector credit, public sector investment, and steady private remittance inflows which continue to support private consumption and real estate activity.
“Risks to the growth outlook, however, remain significant and tilted to the downside, including uncertainties arising from the global economic and geopolitical environment, COVID-19 situation, and climate-related impact on domestic food production. Furthermore, the Bank’s latest Business Sentiment Survey has shown that the ongoing shocks continue to dent business confidence and that the near-term inflation expectations are still high,” he told bank managers and journalists.
He added: “The balance of payments position continues to be under pressure on account of the ongoing shocks. Imports of goods increased by 12.9 percent (year-on-year) to US$317.5 million in the first half of 2022, mainly reflecting increased imports of energy, food, and vehicles. Exports increased by 23.8 percent (year-on-year) to US$25.5 million in the first half of 2022.”
He noted that an uptick in tourism coupled with steady remittance inflows continues to be reliable sources of foreign currency.
Governor Saidy pointed out that the deterioration in the trade balance resulted in a higher current account deficit of US$25.6 million (1.3 percent of GDP) in the first half of 2022, relative to a deficit of US$8.3 million (0.5 percent of GDP) in the corresponding period of 2021.
He also said the gross international reserve buffer, which stood at US$480.7 million (5.4 months of import cover) in end-June 2022, continues to provide adequate cover and cushion against any short-term shocks in the foreign exchange market.
“Activity volume in the foreign exchange market remains robust, and the Dalasi continues to be stable. The volume of transactions, which is an aggregate of sales and purchases of foreign currency, grew by 52.1 percent by end-June 2022 compared to end-March 2022.
Demand for foreign currency emanated mainly from energy and food imports, while supply continues to benefit from steady inflows from private remittances and recovery in tourism receipts.
From March to July 2022, the Dalasi depreciated against the US Dollar by 1.4 percent. However, it appreciated against the Great Britain Pound by 4.9 percent, the Euro by 3.6 percent, and the CFA Franc by 1.9 percent,” he disclosed adding that fiscal operations continue to be expansionary.
“Growth in expenditure continues to outpace revenue generation as international trade tax receipts and non-tax revenue continues to decline. Disbursement of some grants from development partners did not materialize,” he added.
He said, as a result, the overall budget deficit (including grants) expanded to 2.8 percent of GDP in the first half of 2022, relative to 2.5 percent of GDP in the corresponding period in 2021 adding that the stock of domestic debt stood at D38.4 billion in July 2022, from D37.2 billion in 2021.
However, he said the domestic debt-to-GDP ratio declined from 35.4 percent in 2021 to 33.3 percent by end-July 2022. Short-term debt still accounts for more than half of the domestic debt and the refinancing and interest rate risks remain elevated.
“Yields on government securities have started rising. The weighted average interest rate on treasury bills increased from 3.2 percent in July 2021 to 7.2 percent in July 2022.
The banking system continues to be stable with robust financial soundness indicators. The risk-weighted capital adequacy ratio stood at 27.8 percent at the end of June 2022, and all the banks were well above the regulatory requirement of 10 percent,” he noted.
“The liquidity ratio of 73.2 percent was also above the prudential requirement of 30 percent. Asset quality has improved with a decline in the industry’s total non-performing loans to 4.2 percent of gross loans as of end-June 2022, and banks have continued to maintain an adequate provisioning level,” added.