CENTRAL BANK OF SEYCHELLES

Transcription

1 CENTRAL BANK OF SEYCHE LLES MONTHLY REVIEW May 2013

2 1.0 Key Economic Developments As observed in recent months, inflationary pressures continued to ease during May However, the month also experienced its first monthly depreciation of the Seychelles Rupee (SCR) for the year The average traded value of the domestic currency against the US dollar rose from in April to in May, showing a depreciation of 0.6 per cent. To a large extent, such development reflected a seasonal increase in demand for foreign exchange approaching the second half of the year. Nevertheless, the supply of foreign currency remained stronger than the comparable period of 2012, supported by the continuing positive performance of the tourism sector. At the end of the period under review, visitor arrivals stood at 15 per cent higher than the comparable period of Against the above backdrop, economic activity remained on the upside supported by the expansionary monetary policy stance of the Central Bank. At this point, the Bank does not foresee major inflationary risks and is expected to maintain its loosened monetary policy stance. During the month, it was able to increase its international reserves position to cover an estimated 3.4 months of the country s import requirements. 1.1 Tourism A total of 16,815 visitors arrived in Seychelles during the month of May 2013, reflecting a 13 per cent increase in comparison to May On a year-to-date basis, 96,934 visitor arrivals were recorded, representing a growth of 15 per cent over the 2012 level. As per tradition, the majority of visitors originated from Europe. They accounted for 72 per cent of total arrivals in May However, contrary to recent trend whereby France has been the leading European supply market, during the period under review, most tourists originated from Germany (3,081 in total). France was second and supplied 2,810 visitors. Of note, the number of visitors from Asia fell by 1.8 per cent in comparison to May Inflation The month-on-month change in the Consumer Price Index (CPI) was an increase of 0.3% in May 2013, slightly higher than 0.2% recorded in the previous Chart 01: Inflation month. This was mainly driven by a 5.8% increase in fish prices. Per cent (%) Annualised Year-on-year Year-on-year inflation dropped from 5.3% in April to stand at 3.7% in May This fall of 1.6 percentage points in one month was due to the rebasing effect given the upward revision in tariffs for utilities and the increase in commercial gas prices, both of which were effected in May

3 With regards to the 12-month average inflation rate, this consistently fell from 7.1% in April to 6.6% in May Exchange Rates For the period under review, the Seychelles rupee traded at an average of against the US dollar, representing a depreciation of 0.6 per cent relative to the previous month Chart 02: Exchange Rates The rupee also depreciated by 0.7 per cent (or 11 cents) against the Euro, trading at an average of compared to in April Consequently, May 2013 saw the first monthly depreciation of the domestic currency for the year. R R/US$ R/EUR Nonetheless, on a year-on-year basis, the rupee appreciated by 17 per cent and 16 per cent against the US dollar and Euro, respectively. 1.4 Foreign Exchange Transactions Gross purchases (or supply) of foreign exchange into the system reported 1 for the month of May 2013 amounted to US$49 million, representing an 11 per cent increase over the same period in Total sales (or demand) for foreign exchange rose by 17 per cent in comparison to May It amounted to US$51 million which implies a net sale of US$1.8 million was recorded during the month under review. The bulk of foreign exchange transactions were channelled through commercial banks. They accounted for 71 per cent and 72 per cent of purchases and sales, respectively. 1.5 Interest Rates During the period under review and for the fourth consecutive month, a decrease was observed in the average effective lending rate. The fall was from 12.90% to 12.31%. 1 Reported by commercial banks and bureaux de change (authorised dealers) 2

4 Per cent (%) Chart 03: Interest Rates A decline was also observed in the rate of interest on fixed-term rupee deposits. This was by 54 basis points to an average of 4.73% for the month. The above-mentioned month-on-month drop in interest rate followed a reduction in yield on instruments in the maturity profiles less than 7 days and 3 months up to 6 months by 1.3 percentage points Average Lending Rate Savings Rate (secondary axis) and 1.2 percentage points, respectively. However, the average interest rate on fixed-term deposits was 1.71 percentage points higher than in the same period of Per cent (%) With regards to the average savings rate, this fell from 2.04% in April to stand at 1.78% in the month under review. As a result, the spread between the average lending rate and savings rate stood at 10.53%, showing a slight decline of 32 basis points in relation to the previous month. 1.6 Reserve Money and Monetary Aggregates Reserve Money 2 In May 2013, the reserve money target, applicable for the quarter, was R1,980 million. Similar to the previous month, the Central Bank did not conduct any open market operations. This was consistent with the Bank s new approach in the implementation of monetary policy whilst work is also being undertaken to move towards a more flexible monetary policy framework. During the month, there was R (millions) Chart 04: Reserve Money 2,450 2,350 2,250 2,150 2,050 1,950 1,850 1,750 1,650 Reserve Money Target maturity of deposit auction arrangements (DAA) worth R45 million inclusive of interest payments. 2 Reserve money consists of currency in circulation and depository corporations reserves at the Central Bank. Under the adopted monetary targeting framework, the Central Bank has to ensure the level of reserve money does not exceed a predetermined ceiling. As at March 2013, reserve money is inclusive of the Seychelles Credit Union. 3

5 In view of the above and the associated increase in liquidity into the system, the stock of reserve money ended the month at R444 million above the target or at R2,434 million Monetary Aggregates The net foreign assets (NFA) position of the financial system expanded by 6.5 per cent on a month-on-month basis, ending May 2013 at R5,506 million. Chart 05: Monetary Aggregates This was as a result of a 12 per cent and R (millions) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2, Money Supply, M3 Money Supply, M2 Money Supply, M1 m-m Change - M3 m-m Change - M2 m-m Change - M1 3.7 per cent increase in the position of ODCs and the Central Bank, respectively. Monetary statistics however showed a 1.8 per cent decline in domestic assets, falling from R5,545 million in April to R5,447 million in May The month also recorded an expansion in the money supply. The broadest monetary aggregate, M3, grew by 3.4 per cent relative to the previous month to stand at R8,296 million. The growth in M3 was the result of an increase in all of the main components of monetary aggregate, more notably foreign currency deposits. The latter rose by 6.7 per cent or by US$13 million. In US dollar terms, foreign currency deposits increased from US$228 million to US$242 million over that same period Change (per cent) M1 grew by 1.6 per cent, mainly due to a 2.5 per cent increase in transferable deposits of public entities. This, coupled with a 2.0 per cent increase in quasi money was the main cause of an expansion of 1.8 per cent in M2. Year-on-year, M3 expanded by 5.9 per cent. There was also an increase of 3.1 per cent in M1. In rupee terms, the total amount of residents foreign currency deposits rose by 12 per cent relative to the same period in

6 1.7 Credit As at end of May 2013, the stock of outstanding credit 3 stood at R6,243 million, representing a month-on-month growth of 1.9 per cent. This followed a 6.4 per cent increase in claims on government as well as a rise of 66 per cent in claims on the public non-financial sector. Alternatively, the balance of credit extended to the private sector declined by 4.5 per cent during the month. This month-on-month contraction in credit to the private sector was primarily driven by a 10 per cent reduction in loans disbursed to the tourism sector. In contrast, credit extended to the building and construction sector grew by 3.7 per cent. R (million) Chart 06: Credit 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 Government Public Non-Financial Sector Private sector In comparison to the same period in 2012, the stock of ODCs credit has grown by 9.0 per cent, with outstanding credit to the government showing an increase of 30 per cent attributed to higher issuance of Treasury bills. 3 Excluding that of the Central Bank 5

7 1.8 International Reserves US$ (million) Chart 07: International Reserves Gross Foreign Reserves Import Cover (Secondary Axis) market for reserve accumulating purposes. Months As at the end of May 2013, the stock of gross international reserves stood at US$336 million which was an increase of US$11 million in relation to the previous month. This was equivalent to 3.4 months of imports 4. Net International Reserves (NIR) 5 amounted to US$260 million, exceeding its target by US$24 million. This was as a result of the Bank s purchases from the 1.9 Fiscal Outcome For the month of May 2013, government accounts recorded a primary surplus of R227 million which was equivalent to 1.5 per cent of GDP. This surplus was R2.4 million higher-than-budgeted and was the result of overperformance of revenue coupled with savings materialised on the expenditure side Chart 08: Fiscal Outcome, May 2013 Total expenditure and net lending stood at R337 million in actual terms, which was 20 per cent less than budgeted. At R282 R (millions) million, current outlays were 15 per cent below the allocated amount. Capital expenditure stood at R47 million thus 46 per cent less than budgeted Total Revenue Total Expenditure Budget Primary Balance Actual Overall Balance Total revenue was R553 million (including R3.7 million in grants), 15 per cent or R70 million above the budgeted amount. This overperformance was as a result of higher-than-expected tax revenue, namely under the categories value added tax and business tax by 10 per cent and 69 per cent respectively. Notable, R33 million in outstanding GST was also collected during the month. 4 Based on the latest forecasted value of imports of goods and services for the year The calculation of NIR excludes blocked deposits at the Central Bank. 6

8 1.10 Public Debt The total stock of public debt stood at R10,367 million (US$877 million) which was equivalent to 69 per cent of GDP. This represented a monthly incline of 1.0 per cent in rupee terms and 0.2 per cent in US dollar terms respectively. Chart 09: Public Debt R (million) 12,000 10,000 8,000 6,000 4,000 2,000 In comparison to May 2012, the stock of public debt fell by 1.7 per cent in rupee terms but rose by 20 per cent US dollar terms The year-on-year decrease in rupee terms was as a result of an 18 per cent appreciation of the rupee against the US Domestic debt External debt Total debt Domestic debt External debt Total debt dollar which resulted in a reduction of 14 per cent in the rupee value of external debt. Over the same period, the increase in domestic debt was by 17 per cent whilst in US dollar terms, external debt rose by 4.4 per cent % of GDP When expressed in terms of GDP, the aggregated stock of public debt declined by 8.9 percentage points relative to May Notable, the government s target is to reduce total public debt to 50 per cent of GDP by

9 2.0 Key Financial Sector Developments General Financial Soundness Indicators Chart 10: General Financial Soundness Indicators 17,500 15,000 As depicted in Chart 10, while May 2013 observed growth in the industry s total assets and deposit liabilities, a slight decline was 12,500 recorded in equity capital 7 and loans and 10,000 7,500 advances. 5,000 2,500 0 Total assets grew by R752 million or by 5.1 per cent. This was mainly attributed to an increase of R564 million in the industry s Total deposits liabilities Loans & advances Total assets Equity Capital external assets 8, more precisely balances due from financial institutions abroad which grew by R438 million. The total value of securities and other investments increased by R144 million while cash in foreign currency declined by R18 million to end the month at R61 million. R (millions) Total deposit liabilities rose by R812 million or by 6.6 per cent from the previous month. This was driven by a R950 million increase in the industry s foreign checkable deposits. The stock of savings deposits grew by R48 million while term deposits fell by R34 million but remained the second major component of total deposits. The main component was checkable deposits which stood at R8,327 million as at May The industry s loans and advances fell by R21 million ( 0.5 per cent) following decreases mainly in loans denominated in foreign currency by R31 million. To note, the tourism sector was the main contributor to the drop in total loans. Compared to the previous month, loans and advances to this sector fell by R62 million. The next significant contraction in total loans and advances was 3.0 per cent recorded under the category real estate. As at the end of May 2013, total loans and advances stood at R4,108 million. The value of equity capital fell by R50 million from April to May 2013 to settle at R1,517 million. This was as a result of an audit adjustment and dividend payment for one particular bank. For the period under review, the industry recorded a profit of R45 million compared R46 million in the previous month. The slight reduction in profit in May 2013 was largely attributed to lower interest income on term loans by R4.2 million. 6 The statistics in section 2 are compiled for prudential purposes and therefore follow different conventions to those in section 1. 7 This includes paid-up capital, statutory reserve fund, other reserves, undistributed profit or loss and current unaudited profit or loss. 8 This consists of cash in foreign currency, balances due from financial institutions abroad and securities and other investments. 8

10 Central Bankk of Seychelless Monthly Review: May 2013 On a year-on-year (7.4 per cent). Additionally, growth was observed in total assets (3.4 per cent) and total deposits liabilities (4.5 per basis, the industry observed growth in its total loans and a advancess (1.9 per cent) and equity capital cent) Capital Adequacy Indicators The Capital Adequacy Regulations, 2010 stipulates a minimum Capital Adequacy Ratio 9 of 12 per cent. As depicted in Chart 11, the industry Capital Adequacy Ratio fell by 3.4 percentage points to settle att 27 per cent in Percentage (%) Chart 11: Capital Adequacy Indicators May Jun Jul Aug Sep Oct Nov Dec Jan Febb Mar Apr May Regulatory capital to risk weighted assets Net tangible capitalization ratio May This shows thatt the industry remained well above the minimum required level. As regards to the net tangible capitalisation ratio, a decline of 8.0 percentage points was observed from the previous month. The ratio was 9.9 perr cent and was therefore above the recommended 6.0 per cent which showss that the industry is well capitalised and well w cushioned in case of unexpected future losses. 2.3 Asset Quality Indicators Similar to April 2013, a decline was recorded r in the stock of non-performing loans 100 (NPLs) during the month under review except for specific provisions 11 Chart 12: Asset Quality Indicators which increased slightly NPLs fell by R3.7 million, driven by declines in loans classified in the substandard and doubtful category. As for specificc provisions, this increased by R18 thousand in May Declines were observed in loan provisions in the special mention, substandard and doubtful R (millions) MayJun Jul AugSep OctO NovDec JanFebMarAprMay Non performing loans (NPLs) Specific Provisionss Non-performing loans to gross loans (secondary axis) Provision as % of non-performinn ng loans (secondary axis) Percentage (%) 9 Capital base (consist primarily of paid-upp capital, statutory reserve fund, undistributed profit or loss, year to date net profit and general provision) divided by risk adjusted assets (on balance sheet and off balance sheet assets that have been weighted according to their risks plus the operational risk capital charge). 10 These include loans classified as substandard, doubtfull and loss category as per the Credit Classification and Provisioning Regulations 2010, as amended in Specific provisions are provisions made on special mentions loans and NPLs. 9

11 category while the increase in provision was observed on loans in the loss category. Similar to the previous month, for the period under review, the ratio of the industry s NPLs to gross loans remained stable at 9.5 per cent in May Provisions as a percentage of NPLs ratio rose by 1.0 per cent during the same period, which was driven by a decline in non-performing loans. As at May 2013, the industry s provisions as a percentage of NPLs stood at 38 per cent. 2.4 Earnings and Other Indicators Percentage (%) Chart 13: Earnings and Other Indicators Return on assets Return on equity Broad liquid assets to total liabilities Net open position to capital During the month under review declines were observed in the industry s Return on Assets (ROA) and Return on Equity (ROE). From April to May 2013, ROA decreased from 4.7 per cent to 4.3 per cent and ROE fell from 45 per cent to 42 per cent. The movement in both ratios was driven by increases in average assets and equity despite the fact that the industry recorded relatively lower net profit before provisions. The industry s broad liquid assets 12 to total liabilities rose by 1.5 percentage points in May 2013 as a result of an increase in liquid assets. The ratio shows that the industry s broad liquid assets could match 60 per cent of its total liabilities 13 as at the end of May The industry s net open position to capital stood at 7.3 per cent as at May 2013, representing a slight increase during the month under review. The total long and total short position to capital ratio was 13 per cent and 6.1 per cent respectively, which was well within the 30 per cent limit as prescribed by the Foreign Currency Exposure Regulations, Consist of cash, balances with CBS, balances with other banks and Government securities. 13 This is in line with the Liquidity Risk Management Regulations, 2009 which stipulates that a bank shall maintain liquid assets in an amount which shall not, as a daily average each month, be less than 20 per cent of the bank's total liabilities. 10

12 Summary of Financial Indicators (Ratios) Figures are in SCR 000 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Total deposits liabilities 12,518,465 12,548,904 12,090,627 11,460,457 12,926,022 11,873,797 11,876,112 12,344,627 12,644,422 12,327,873 12,111,229 12,273,586 13,085,286 Total assets 14,995,053 15,092,958 14,591,081 13,839,419 15,388,627 14,266,597 14,277,211 14,835,716 15,119,446 14,752,696 14,530,814 14,748,085 15,500,354 Loans & advances 4,031,623 4,071,870 4,033,696 4,018,417 4,103,493 4,068,772 4,107,079 4,171,083 4,090,495 4,084,261 4,164,252 4,128,377 4,107,520 Equity Capital 1,412,915 1,433,249 1,458,351 1,471,259 1,502,474 1,496,513 1,524,901 1,525,376 1,520,903 1,519,883 1,509,179 1,567,612 1,517,318 Non-performing loans (NPLs), gross 354, , , , , , , , , , , , ,346 Actual Provisions (Specific) 118, , , , , , , , , , , , ,441 Figures are in percentage (%) May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Capital Adequacy Regulatory capital to risk weighted assets Net tangible capitalization ratio Asset Quality Non-performing loans to gross loans Provision as % of non-performing loans Earnings & Profitability Return on assets Return on equity Liquidity Broad liquid assets to total liabilities Sensitivity to Market Risk Total long position in foreign exchange to capital Total short position in foreign exchange to capital Net open position to capital