1 RED June/July 2018 JUNE/JULY 2018

Transcription

1 1 RED June/July 20 JUNE/JULY 20

2 2 RED June/July 20 MAJOR HIGHLIGHTS Headline consumer inflation grew by 4.9 per cent in June 20 compared to 4.8 per cent recorded in May 20 Inflation rate (% y/y) 4.9 (June) Discount and prime lending rates were unchanged in July 20. Prime Lending (%) Discount rate (%) 6.75 During the month of July 20, the value of the Lilangeni weakened on average against the US Dollar. Exchange rate (US$) 13.41(July) Credit Extended to the Private Sector depicted a month-on-month improvement of 2.2 per cent to reach E14.5 billion at the end of June 20. Private Sector Credit (% m/m) 2.2 (June) Broad Money Supply (M2) expanded by 1.1 per cent to settle at E.0 billion at the end of June 20. Broad Money (M2) (% m/m) 1.1 (June) Gross Official Reserves accelerated by.7 per cent from the preceding month to reach E7.2 billion at the end of July 20. Reserves (months of import cover) 3.5 (July) As at 31 July 20, preliminary debt figures indicate that total public debt stood at E12.9 billion, an equivalent of 20.7 per cent of GDP. Total Public Debt (% of GDP) 20.7 (July) As at May 20, the country s trade deficit widened to E196.3 million, up from a deficit of E64.7 million, which was equivalent to 0.31 per cent of GDP. Merchandise Trade Balance (% of GDP) 0.31 (May) NB: The table shows the most recent available data.

3 year-on-year % change 3 RED June/July 20 1 Inflation Developments Headline consumer inflation grew by 4.9 per cent in June 20 compared to 4.8 per cent recorded in May 20. Following a persistent decline since beginning of the year 20, inflationary pressures mainly emanated from the transport index, which grew by 3.8 per cent in June 20 from 3.4 per cent recorded in May 20. The growth in transport inflation was due to an increase in domestic fuel prices in the month under review. Even though food inflation remained at a deflation zone, it recorded a 0.6 of a percentage point increase to a deflation of 0.7 per cent in June 20 from a deflation of 1.3 per cent in the previous month. This was mainly driven by annual price increases for bread and cereals and fruits and vegetables. The above increases were slightly offset by decreases in the price indices for furnishing and household equipment and miscellaneous goods and services. The index for furnishing and household equipment grew by 2.6 per cent in June 20 compared to 3.4 per cent in the previous month. On the other hand, miscellaneous goods and services inflation declined to 0.3 per cent from 1.1 per cent, during the period under review. This deceleration was largely a result of slower increases in the prices of personal care and personal effects services. Figure 1: Inflation Trends: June 20 to June Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Food Transport Overall Other Source: Central Statistical Office On month-on-month rates, consumer inflation recorded a deflation of 0.1 per cent in June 20 from a growth rate of 0.3 per cent in May 20. Contributing to this deflation were

4 E'billion % change 4 RED June/July 20 slower increases in the price indices for housing and utilities and food and non-alcoholic beverages, which declined by 0.5 and 0.3 of a percentage point, respectively. Core inflation, which is measured as the CPI excluding food and non-alcoholic beverages, auto-fuel and energy grew by a slower 7.2 per cent in June 20 from 7.3 per cent in May 20. On month-on-month rates, core inflation recorded zero growth in June 20 compared to the 0.4 per cent growth recorded the previous month. 2 Money Supply and Banking Developments Net Foreign Assets continued on a downward trend depicting a month-on-month contraction of 7.2 per cent at the end of June 20, following a 14.2 per cent decline observed in the previous month. Consequently, Net Foreign Assets stood at E6.9 billion over the month under review. The contraction in Net Foreign Assets was evident in both Net Foreign Holdings of the Official Sector and those of Other Depository Corporations. Net Foreign Holdings of the Official Sector declined by 8.4 per cent to settle at E5.1 billion at the end of June 20, down from E5.4 billion recorded in May 20. The decline was due to payment of Government s budgetary obligations over the review month. Net Foreign Holdings of Other Depository Corporations fell by 3.2 per cent to close the month under review at E1.7 billion compared to the E1.8 billion realized in May 20. The contraction resulted from a decline in their investments in the Common Monetary Area (CMA). Figure 2: Net Foreign Assets Monthly Changes: June 20 to June Jun - Jul- Aug - Sep - Oct - NFA (E'billion)) NFA (% change) Nov - Dec - Jan - Feb - Mar - Apr - May - Jun

5 GOR (E' Billions) Months Import Cover 5 RED June/July 20 The value of Net Foreign Assets in Special Drawing Rights (SDRs) narrowed by 14.5 per cent at the end of June 20 to settle at SDR354.3 million, lower than the SDR414.3 million posted in May 20. Compared year-on-year, Net Foreign Assets decreased by.6 per cent in Emalangeni terms and by 23.4 per cent in SDR terms. Gross Official Reserves (GOR) accelerated by.7 per cent from the preceding month to reach E7.2 billion at the end of July 20. The Reserves were mainly boosted by the quarterly inflow of the Southern African Customs Union revenue at the beginning of July 20. At this level, the Reserves were equivalent to 3.5 months of imports, higher than the 2.9 months observed in June 20. When valued in Special Drawing Rights (SDRs), the Reserves stood at SDR392.0 million at the end of July 20 reflecting a month-on-month rise of 25.0 per cent from the previous month. Compared over the period July 20 to July 20, the Reserves contracted by 11.7 per cent when valued in Emalangeni terms and by 11.1 per cent in SDRs. Figure 3: Gross Official Reserves and Import Cover: July 20 to July Jul- Aug Sep Oct- Nov Dec Jan Feb Mar Apr May Jun Jul GOR Import Cover Credit Extended to the Private Sector depicted a month-on-month improvement of 2.2 per cent to reach E14.5 billion at the end of June 20, up from E14.2 billion registered in May 20. All components of Private Sector credit increased with the exception of credit to Households & Non-Profit Institutions Serving Households (NPISH) sector, which trended downwards. When compared over the year, Private Sector credit increased by 10.7 per cent. Credit Extended to Businesses rose by 7.6 per cent month-on month, to reach E6.4 billion at the end of the month under review. Growth was boosted by increased lending to all subsectors as follows; Manufacturing (22.8 per cent), Community, Social & Personal

6 % change 'other sectors' % change PS 6 RED June/July 20 Services (14.3 per cent), Distribution & Tourism (10.9 per cent), Mining & Quarry (7.9 per cent), Construction (6.0 per cent), Agriculture & Forestry (4.2 per cent), Real Estate (3.2 per cent) and Transport & Communications (1.4 per cent). Year-on-year, credit to Businesses grew by 9.6 per cent. Credit Extended to Other Sectors expanded by 3.9 per cent to settle at E2.2 billion at the end of June 20, up from E2.1 billion posted in May 20. Growth was driven by credit to Local Government, which grew by 67.8 per cent and credit to Public Non-Financial Corporations by 10.0 per cent. Credit to Other Financial Corporations on the contrary fell by 0.5 per cent over the month under review. Year-on-year, credit to Other Sectors increased by 62.5 per cent. Figure 4: Private Sector Credit Monthly Changes: June 20 to June Jun- Jul- Aug - Sep- Oct- Nov - Dec - Jan- Feb - Mar- Apr- May - Jun BCr HH Other PS BCr: Credit Extended to Business HH: Credit Extended to Households PS: Private Sector Credit Credit Extended to Households & Non-Profit Institutions Serving Households (NPISH) went down by 3.6 per cent month-on-month to settle at E5.9 billion at the end of June 20. The decline was observed in all components of Households loans; Motor Vehicle Finance, Other Personal (unsecured) Loans and Mortgage Loans. As a result, Motor Vehicle Finance fell by 13.4 per cent to E860.9 million, Other Personal (unsecured) Loans by 2.7 per cent to E1.9 billion and lastly Mortgage Loans by 1.0 per cent to E3. billion. On an annual basis, credit to Households grew by 0.05 per cent. Net Government Balances held with Other Depository Corporations stood at E1.5 billion at the end of June 20. This development in net Government balances was due to a reduction in both Government deposits and net claims on Government by 38.3 per cent and

7 % change Total (E'Billion) 7 RED June/July per cent respectively. On a year-on-year comparison, net Government balances depicted a significant contraction. Figure 5: Household Credit Monthly Changes: June 20 to June Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Housing Motor Vehicles Other Total Total (E'Billion) Broad Money Supply (M2) expanded by 1.1 per cent to settle at E.0 billion at the end of June 20. The increase was mainly driven by Narrow Money Supply (M1) whilst Quasi Money Supply trended in the opposite direction and recorded a contraction over the month under review. Year-on-year, M2 accelerated by 3.4 per cent. M1 grew by 6.2 per cent month-on-month to reach E6.0 billion at the end of June 20. Growth was buoyed by both components of M1, Currency Outside Depository Corporations and Transferable deposits. As a result, Currency Outside Depository Corporations rose by.4 per cent to E685.4 million and Transferable (Demand) Deposits by 4.9 per cent to settle at E5.3 billion. Compared over the same period last year, M1 improved by 5.6 per cent. Quasi Money Supply amounted to E11.1 billion at the end of June 20, reflecting a decline of 1.4 per cent month-on-month. The reduction was observed in Time Deposits whilst Savings Deposits expanded at the end of June 20. Consequently, Time deposits slowed by 1.8 per cent to E9.4 billion over the month under review. Savings Deposits on the contrary improved by 0.8 per cent to E1.6 billion. When compared over the year, Quasi Money Supply increased by 2.2 per cent.

8 % change M2 (E'billion) 8 RED June/July 20 Figure 6: Money Supply Monthly Changes: June 20 to June Jun- Jul- Aug- Sep- Oct- Nov- M M Quasi M2 (E'billion) Dec- Jan- Feb- Mar- Apr- May- Jun During the month of July 20, the Lilangeni was weaker against major currencies, but showed signs of recovery towards the end of the month, ending the period stronger against the US Dollar, Pound Sterling and the Euro. The Rand, hence Lilangeni, suffered under regional challenges emanating from South Africa and international challenges. The positive sentiments in the local unit limiting its loses emerged as South Africa secured huge foreign investment from China extended through the New Development Bank under the auspices of BRICS at a conference held in July 20. The downward revision of economic growth forecasts by the South African Reserve Bank and its decision to leave the repo rate unchanged at 6.5 per cent since March 20 widened its interest rate differential with both emerging market and developed economies. As a result, the Lilangeni depreciated slightly, recording a 0.8 per cent drop against the US dollar to average E13.41, a 0.03 per cent drop against the Pound Sterling to average E.67 and a 1.0 per cent drop against the Euro to average E15.67 in the period under review compared to averages recorded in the previous period. Outcomes from the BRICS conference held in July 20 in South Africa saw South Africa securing a USD 14.7 billion investment from China coupled with other investments from Saudi Arabia and UAE, which cushioned the rand against the losses and pushed it to end the period in a better position. The improved investor sentiments came in as a boost to the rand as South African bonds became more attractive than in other Emerging Markets. Consequently, the local unit appreciated by 3.8 per cent against the US dollar, by 3.6 per cent against the Pound Sterling and 3.1 per cent against the Euro to end the month of July 20 at E13., E.30 and E15.44, respectively compared to exchange rates recorded at the end of the previous period.

9 Emalangeni 9 RED June/July 20 Figure 7: Average Exchange Rates: July 20 to July Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- USD GBP Euro The local unit remains under pressure in the midst of political and economic developments both in South Africa and abroad. This includes the on-going trade war between US and China and the tight monetary policy among developed economies, especially the US. Moreover, the uncertainty around the legislation amendment intended to accommodate the expropriation of land without compensation in South Africa, may dampen investor sentiments. 3 Public Debt As at 31 July 20, preliminary debt figures indicate that total public debt stood at E12.9 billion, an equivalent of 20.7 per cent of GDP. This reflects that total public debt has remained steady over the past month as E12.9 billion was also recorded in June 20. At the end of July 20, external debt stood at E5.2 billion, an equivalent of 8.5 per cent of GDP. This shows that external debt has remained unchanged in the month under review. While payments were made on external loans, the movements have not been significant to warrant a change in the debt levels, especially since the Lilangeni strengthened against the USD and other major currencies in which the country s liabilities are denominated.

10 E' Billion % of GDP % of GDP E' Billion 10 RED June/July 20 Figure 8: Total Public Debt: July 20 to July Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Domestic External Total % of GDP Source: Ministry of Finance and Central Bank of Eswatini Domestic debt stood at E7.7 billion at the end of July 20, an equivalent of 12.4 per cent to GDP. Domestic debt remained unchanged when compared to the previous month. Figure 9: Public Domestic Debt: July 20 to July Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- CBS Advance T-Bills Bonds & PN Total % of GDP Source: Ministry of Finance and Central Bank of Eswatini Of the outstanding domestic debt, E5.1 billion accounts for bonds, E2.3 billion accounts for treasury bills and the remaining E0.3 billion accounts for Promissory Notes.

11 11 RED June/July 20 Figure 10: Domestic Debt Instruments Outstanding as at 31 July 20 Suppliers' Bonds, 5.69% Infrastructure Bonds, 7.26% Promissory Notes, 3.65% T-bills, 30.71% Plain Vanilla Bonds, 52.91% Source: Ministry of Finance and Central Bank of Eswatini While commercial banks continued to dominate participation in Government securities on the shorter end of the yield curve, non-bank financial institutions dominate on the longer term securities. Table 1: Domestic Debt Instruments Outstanding by Holder as at 30 July 20 Holder Treasury Bills Government Bonds (E Million) Promissory Notes Total Share of Holdings (%) CBS 0.0 1, , Commercial 1, , banks NBFIs , , Other Total 2, , , Source: Ministry of Finance and Central Bank of Eswatini

12 E Millions 12 RED June/July 20 4 The External Sector As at May 20, the country recorded a wider deficit of E196.3 million from a deficit of E64.7 million recorded in the previous month. Exports increased for the first time in May since February 20, expanding by 13.7 per cent month-on-month to E1.770 billion. Imports on the other hand, continued to out-pace exports increasing by 21.3 per cent to E1.966 billion, resulting in the further deterioration in the trade balance. The overall increase in exports was largely driven by sugar exports, which grew by 4.0 per cent in May, coupled with.0 per cent month-on-month increase in miscellaneous edibles of E604.4 million. Wood and articles of wood recorded an increase of 20.7 per cent monthon-month to E122.1 million, contributing to the improved level of exports albeit not enough offset the effect of the widening trade deficit. Year-on-year however, exports fell by 2.6 per cent. Imports in the period grew significantly from E1.621 billion to E1.966 billion in April and May respectively. The import of mineral fuels increased by 19.3 per cent to E235.8 million in the month, while import of vehicles excluding rail decreased by 9.5 per cent to E Billion. A year-on-year comparison shows that imports increased by 10.8 per cent. Figure 11: Merchandise Trade: December 20 to May 20 (E Million) ( 500) Dec- Jan- Feb- Mar- Apr- May- Exports Imports Trade Balance ( 214.8) 57.3 ( 35.9) ( 64.7) ( 196.3)

13 % change Per cent % change % change 13 RED June/July 20 ` Economic Policy, Research and Statistics Division Kingdom of Eswatini Economic Indicators at a glance Sectors Dec- Jan- Feb- Mar- Apr- May- Jun- Overall Inflation Food Transport Other Money and banking Narrow money annual growth (%) Broad money annual growth (%) Domestic credit (net) - E' Million Government Private sector Private sector credit annual growth (%) Interest rates (% p.a) Prime lending Discount rate Deposit rate - 31 days months T. bill rate Ratios Liquidity ratio (required = 20 %) Loans/deposits ratio Net foreign assets (E'million) Annual % change in NFA Gross official foreign reserves E'Millions Annual % change in GOR In months of import cover Exchange Rates US$ EURO GBP Public Finance Total public external debt [E' million] As a % of GDP Total public domestic debt [E' million] As a % of GDP Total public debt [E' million] As a % of GDP NB: For consistency, the table shows data up to the end of June Inflation Components Food Transport Other Overall Inflation Money Supply Growth Narrow money annual growth (%) Broad money annual growth (%) - Annual Changes in PSCR, NFA, GOR PSCR NFA GOR Public Debt Changes to GDP Total Debt Ext. Debt Dom. Debt