Gambia’s economy shrinks by more than 3%

Latest figures from the Gambia Bureau of Statistics have indicated that the country’s economy shrunk by 3.3 per cent in 2011 due primarily to the contraction in the value-added of agriculture.

This was contained in a July 27 report of the Monetary Policy Committee (MPC) of the Central Bank of The Gambia.

Speaking at the MPC meeting held on 27 July at the conference room of the Central Bank in Banjul, Governor Amadou Colley said the country’s economy is expected to grow by 9.7 per cent in 2013 premised on improved agriculture output and continued rebound of the tourism sector.  The growth of the Gross Domestic Product (GDP) from one period to another is an indication of how healthy the country's economy is.

In the first quarter of 2012, the economy registered a deficit of D418.6 million, which is a modest improvement compared to the deficit of D469.50 million in the first half of 2011.

The country’s fiscal performance continues to be challenged by higher-than-projected expenditures unmatched by revenue performance of the economy. 

Total revenue and grants amounted to D3.2 billion of which D2.5 billion consist of domestic revenue, comprising tax and non-tax revenue. 

 However, total expenditure and net lending amounted to D3.6 billion.

As at end-June 2012, the total outstanding domestic debt of The Gambia government had risen to D9.9 billion or 2.7 per cent year-on-year.  Outstanding treasury bills, accounting for 72.9 per cent of the debt stock, rose by 13.7 per cent.  Interest on domestic debt, which continues to rise by the day, consumes more than 22% of the annual national budget. 

Governor Colley noted 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. 

“Balance of payments estimates for the first quarter of 2012 indicated an overall surplus of US$15.11 million, lower than the surplus of US$34.0 million in the corresponding period in 2011,” he said.

While this scenario obtains, money circulation in the economy has decelerated to 5.8 per cent in the year to end-June 2012, significantly lower than the 14.9 per cent growth a year ago and also less than the target growth of 9.0 per cent.

The CBG governor said the growth of the country’s real GDP, which is the total monetary value of all goods and services produced domestically in the country over a specified period, is projected to contract by 1.7 per cent in 2012. 

Dalasi decelerates

As at end-April 2012, the value of The Gambia’s currency, the Dalasi, depreciated against some major international currencies, due to the reduced foreign currency inflows and increased demand, Governor Colley said.

The value of the Dalasi has dropped by 9.8 per cent and 6.1 per cent against the US dollar and Pound Sterling respectively.  However, it appreciated by 3.3 per cent against the Euro. The Dalasi depreciated in nominal effective exchange rate terms by 4.7 per cent in June 2012.

Healthy banking industry

The Gambia’s banking industry remains sound, according to the key financial soundness indicators. The average risk-weighted capital adequacy ratio (CAR) was 26.0 per cent in June 2012, higher than the minimum capital requirement of 10.0 per cent. 

The total assets of the industry amounted to D19.1 billion, representing an increase of 5.3 per cent from June 2011. Loans and advances, accounting for 27.4 per cent of total assets, decreased to D5.2 billion, or 0.6 per cent from June 2011, Governor Colley said. 

The ratio of non-performing loans to gross loans declined to 9.8 per cent in June 2012 compared to 12.7 per cent in June 2011, which is attributed to robust loan recovery efforts and the tightening of credit standards by commercial banks.

According to data on holdings of treasury bills by sector, commercial banks held 81.4 per cent of the stock, the non-bank (16.7 per cent) and Central Bank of The Gambia (1.9 percent).

Inflation declines

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, headline inflation, measured by National Consumer Price Index (NCPI), declined to 4.3 per cent in June 2012 compared to 5.4 percent in June, 2011.  Similarly, average inflation rate (12-month moving average) decelerated to 4.1 per cent, lower than the 5.7 per cent a year earlier. 

The CBG governor said 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, 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, according to Governor Colley, has decided to reduce the policy rate, the rediscount rate, by 1 percentage point to 12 per cent.  This is expected to follow a marginal reduction in the interest rates in the country.