1 RED July/August 2018 JULY/AUGUST 2018

Transcription

1 1 RED July/August 20 JULY/AUGUST 20

2 2 RED July/August 20 MAJOR HIGHLIGHTS The country s annual consumer inflation remained unchanged at 4.9 per cent in July 20 same as in June 20. Inflation rate (% y/y) 4.9 (Jul) Discount and prime lending rates were unchanged in May 20. Prime Lending (%) Discount rate (%) 6.75 During the month of August 20, the value of the Lilangeni weakened against the US Dollar. Exchange rate (US$) (Aug) Credit extended to the private sector grew slightly by 1.1 per cent month-on-month to settle at E14.6 billion at the end of July 20. Private Sector Credit (% m/m) 1.1 (Jul) Broad Money Supply (M2) went up by 3.6 per cent to settle at E.6 billion at the end of July 20 compared to E.0 billion registered in June 20. Broad Money (M2) (% m/m) 3.6 (Jul) Gross Official Reserves declined by 10.5 per cent from E7.2 billion observed in July 20 to reach E6.5 billion recorded in August 20. Similarly, the import cover fell from 3.3 months to 3.0 months. As at 31 August 20, preliminary figures indicate that total public debt stood at E13.4 billion, an equivalent of 21.5 per cent of GDP. Reserves (months of import cover) Total Public Debt (% of GDP) 3.0 (Aug) 21.5(Aug) As at July 20, Eswatini s merchandise trade balance recorded a deficit of E169.2 million compared to a wider deficit of E201.2 million observed in June 20, which was an equivalent of 0.29 per cent of GDP. NB: The table shows the most recent available data. Merchandise Trade Balance (% of GDP) 0.29 (Jul)

3 Per cent 3 RED July/August 20 1 Inflation Developments The country s annual consumer inflation remained unchanged at 4.9 per cent in July 20 same as in June 20. Food inflation remained in the deflation zone for the fourth consecutive month, recording a deflation of 1.1 per cent in July 20 from a deflation of 0.7 per cent in June 20. The deceleration in food inflation mainly resulted from decreases in the prices for vegetables, oils and fats and fish and seafood. Additional deflationary pressures emanated from the furnishing and household equipment which declined to 2.1 per cent in July 20 from 2.6 per cent in the previous month. The above decreases were counteracted by increases in the price indices for transport and clothing and footwear. Transport inflation rose by 0.5 of a percentage point to 4.3 per cent in July 20, owing to a 50 cents per litre increase in fuel prices effected in the period under review. In the same line, the index for clothing and footwear grew by 0.8 of a percentage point to record a deflation of 1.6 per cent in July 20 from a deflation of 2.4 per cent in the previous month. Figure 1: Inflation Trends: July 20 to July Source: Central Statistical Office Aug- Sep- Oct- Nov- Food Transport Other Overall Inflation Dec- Jan- Feb- Mar- Apr- May- Jun- On month-on-month rates, inflation increased to 0.1 per cent in July 20 up from a deflation of 0.1 percent the previous month. Notable month-on-month increases in July 20 were observed in the price indices for food and non-alcoholic beverages and transport, which equally grew by 0.4 of a percentage point during the period under review. Core inflation, which is measured as the CPI excluding food and non-alcoholic beverages, auto-fuel and energy remained elevated, recording 7.3 per cent in July 20 from 7.2 per

4 E'billion % change 4 RED July/August 20 cent in June 20. On month-on-month rates, core inflation grew modestly by 0.1 per cent in July 20 compared to the zero growth recorded the previous month. 2 Money Supply and Banking Developments Total Net Foreign Assets increased by 19.1 per cent month-on-month to settle at E8.2 billion at the end of July 20; notably higher than the E6.9 billion observed in June 20. The rise was largely discernible in Net Foreign Assets of the Official Sector and Other Depository Corporations. Net Foreign Assets of Other Depository Corporations amounted to E1.9 billion at the end of July 20 depicting a month-on-month rise of 10.7 per cent. This was a result of an increase in their balances held abroad during the month of July 20. Net Official Assets accelerated by 21.9 per cent from the previous month to settle at E6.3 billion at the end of July 20; in line with the usual inflow of quarterly SACU receipts during the first week of July 20. Valued in Special Drawing Rights (SDRs), Net Foreign Assets increased by 25.3 per cent from the previous month to reach SDR444.0 million at the end of July 20. Compared over the same period last year, Net Foreign Assets in Emalangeni terms contracted by 11.1 per cent and by 10.5 per cent in SDRs. Figure 2: Net Foreign Assets Monthly Changes: July 20 to July Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- NFA (E'billion)) NFA (% change) Gross Official Reserves declined by 10.5 per cent from E7.2 billion observed in July 20 to reach E6.5 billion at the end of August 20. At this level, the reserves were sufficient to cover 3.0 months of imports, down from 3.3 months recorded in July 20. Valued in Special Drawing Rights (SDRs), the reserves declined from SDR392.0 million recorded in July to settle at SDR315.2 million at the end of August 20. Compared year-on-year, the reserves went down by 11.8 per cent in Emalangeni terms and by 21.0 per cent in SDR terms.

5 GOR (E' Billions) Months Import Cover 5 RED July/August 20 Figure 3: Gross Official Reserves and Import Cover: August 20 to August Aug - Sep - Oct - Nov - Dec - Jan - GOR Import Cover Feb - Mar - Apr - May - Jun - Credit Extended to the Private Sector grew slightly by 1.1 per cent month-on-month to settle at E14.6 billion at the end of July 20, higher than the E14.5 billion recorded at the end of June 20. The increase was supported by improved demand for credit by the business sector. Credit to Households & Non-Profit Institutions Serving Households (NPISH) and Other Sectors, however decreased. When compared over the year, Private Sector Credit grew by 11.2 per cent. Credit Extended to Businesses amounted to E6.9 billion at the end of July 20 showing a month-on-month rise of 7.7 per cent from the previous month. The increase in credit to businesses was mainly reflected by these subsectors; Manufacturing (39.7 per cent), Mining & Quarry (.5 per cent) and Construction (9.3 per cent). The rise was however, partly offset by a fall in credit to these subsectors; Agriculture & Forestry (-9.3 per cent) and Community, Social & Personal Services (1.5 per cent). Compared annually, credit to Businesses increased by 16.9 per cent. Credit Extended to Other Sectors receded by 3.5 per cent from the preceding month to settle at E2.1 billion at the end of July 20. The decline in credit to Other Sectors was led by Local Government, which went down by 53.1 per cent followed by Public Non- Financial Corporations by 9.9 per cent. Other Financial Corporations however, increased by 1.9 per cent. Compared over the year, credit to Other Sectors accelerated by 71.4 per cent. Net Government Balances with Other Depository Corporations reflected a reduction from the previous review month to settle at E1.5 billion at the end of July 20. The decline was mainly on account of a rise in claims on Government. When compared over the year, Net Government balances also reflected a contraction. Aug

6 % change Total (E'Billion) % change % change 'PS' 6 RED July/August 20 Figure 4: Private Sector Credit Monthly Changes: July 20 to July 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 & NPISH amounted to E5.6 billion at the end of July 20, reflecting a monthly fall of 4.4 per cent from the previous month. The decline was because of Other Personal (unsecured) Loans, which fell by 10.3 per cent to E1.7 billion as well as Mortgage Loans by 2.7 per cent to E3.1 billion. Motor Vehicle Finance however increased by 1.7 per cent month-on-month to reach E0.9 billion at the end of July 20. Year-on-year, credit to Households & NPISH declined by 6.6 per cent. Figure 5: Household Credit Monthly Changes: July 20 to July Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Housing Motor Vehicles Other Total Total (E'Billion)

7 % change M2 (E'billion) 7 RED July/August 20 Broad Money Supply (M2) went up by 3.6 per cent to E.6 billion at the end of July 20 compared to E.0 billion registered at the end of June 20. The improvement emanated from both Narrow and Quasi Money Supply over the review month. Compared over the year M2 expanded by 6.8 per cent. Narrow Money Supply (M1) recorded a month-on-month rise of 7.7 per cent to E6.4 billion at the end of July 20 as Transferable Deposits increased while Currency Outside Depository Corporation declined. Transferable Deposits went up by 9.6 per cent to E5.8 billion while Currency Outside Depository Corporation fell by 7.0 per cent to E637.3 million. On an annual basis, M1 grew by 20.2 per cent. Quasi Money Supply reflected growth of 1.4 per cent over the month ended July 20 to reach E11.2 billion over the month under review. The increase was attributed to both Time and Savings Deposits. Consequently, Time deposits grew by 1.7 per cent to E9.6 billion and Savings Deposits by 0.2 per cent to reach E1.6 billion. Over the year, Quasi Money Supply expanded by 0.4 per cent. Figure 6: Money Supply Monthly Changes: July 20 to July Aug - Sep - Oct- Nov - Dec - Jan - Feb - Mar - Apr - May - Jun - M M Quasi M2 (E'billion) During the month of August 20, the Lilangeni/Rand exchange rate weakened against major currencies and showed signs of volatility throughout the period under review. Against the US Dollar, the local unit weakened by 4.8 per cent to average E14.06 compared to the month of July 20. The weakening in the local unit comes on the back of higher US inflation, which fueled speculation of more interest rate hikes by the US Federal Reserve Bank. Beside the pressure from the rising US bond yields, the Rand/Lilangeni and other emerging market currencies were kept on a weaker footing by the spillovers from the Turkish

8 Emalangeni 8 RED July/August 20 crisis, which was perpetuated by the US government to impose higher tariffs on Turkish steel and aluminum imports. Towards the end of the month, the Rand/Lilangeni became more volatile reacting sideways to the comments made by the US President on the proposed land reform program by the South African government. In the period under review, the Lilangeni depreciated by 2.5 per cent to average E.02 against the Pound Sterling and by 3.6 per cent to average E16.24 against the Euro compared to the previous month. At the end of the month, the local unit was weaker at E14.77 to the US Dollar, E19.23 to the Pound Sterling and E.24 to the Euro after closing the previous month at E13. to the US Dollar, E.30 to the Pound Sterling and E15.44 to the Euro. Figure 7: Average Exchange Rates: August 20 to August Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Aug- USD GBP Euro The Lilangeni remains sensitive to political developments in South Africa in part due to the ongoing debate around the proposed program to expropriate land without compensation by the South Africa government. The current trajectory of persistent weak economic growth in South Africa and the prospects thereof further discourage any potential for the Rand/Lilangeni to stabilize. The pace of monetary policy tightening by the US Fed and the spillover effects of the trade tensions imposed the by US on other economies further pose a downside risk to the Rand/Lilangeni exchange rate.

9 E' Billion % of GDP 9 RED July/August 20 3 Public Debt Preliminary figures indicate that total public debt stood at E13.5 billion, an equivalent of 21.6 per cent of GDP at the end of August 20. This reflects an increase of 4.6 per cent from the E12.9 billion recorded in July 20. At the end of August 20, public external debt stood at E5.5 billion, an equivalent of 8.9 per cent of GDP. This shows that external debt increased by 5.8 per cent from the previous month. The increase was mainly attributed to the depreciation of the Lilangeni against the USD and other major currencies in which the country s liabilities are denominated. Figure 8: Total Public Debt: August 20 to August Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Aug- Domestic External Total % of GDP Source: Ministry of Finance and Central Bank of Eswatini Public domestic debt stood at E7.9 billion at the end of August 20, an equivalent of 12.6 per cent to GDP. Domestic debt increased by 2.6 per cent when compared to the previous month. The marginal increase was a result of Plain Vanilla Bonds issued during the month, which was nevertheless offset by maturities during the same period.

10 E' Billion % of GDP 10 RED July/August 20 Figure 9: Public Domestic Debt: May 20 to May Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Aug- CBS Advance T-Bills Bonds & PN Total % of GDP Source: Ministry of Finance and Central Bank of Eswatini Four papers were issued in the month of August with the amount offered totalling E150 million. The papers on offer were 3, 5, 7 & 10-year bonds. Total bids received for these papers amounted to E million resulting in a bid-cover ratio of per cent. Allotments made totalled to E million, an allotment rate of per cent. The allotments were more than the amount offered as the issuer reserves the right to allot a maximum of 50 per cent more than the amount on offer. Table 1: Summary of Auction Results (E Million) Bids Bids Allotted By Holder Category Bond Tenor Offered Received Banks NBFIs Individuals SG036 3-Year SG033 5-Year SG034 7-Year SG Year Total 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.

11 E'million 11 RED July/August 20 Table 2: Domestic Debt Instruments Outstanding by Holder as at 31 August, 20 (E Million) Holder Treasury Bills Government Bonds Promissory Notes Total Share of Holdings (%) CBS 2.7 1, , Commercial 1, , banks NBFIs , , Other Total 2, , , Source: Ministry of Finance and Central Bank of Eswatini 4 The External Sector Eswatini s merchandise trade balance recorded a deficit of E169.2 million in July 20, compared to a wider E201.2 million deficit in the previous month. The muted deficit posted in July was on account of slower growth recorded in imports against the growth in exports. Export receipts grew by 3 per cent month-on-month in July with imports registering slower growth of 1 per cent. Figure 10: Merchandise Trade: January 20 to July 20 2,500 2,000 1,500 1, (500) Jan- Feb- Mar- Apr- May- Jun- Exports 1,590 1,879 1,787 1,556 1,770 1,748 1,767 Imports 1,805 1,821 1,823 1,621 1,966 1,919 1,936 Trade Balance (214.8) 57.3 (35.9) (64.7) (196.3) (1.1) (169.2) Data indicates that there has been persistent month-on-month deficits recorded in the merchandise trade account since January 20. In May 20, the deficit reached an all-time

12 12 RED July/August 20 high of E245.6 million after recording a record low of E43.7 million in March. Year to date, the only surplus recorded in the account amounted to E28.6 million in the month of February. Considering the first seven months of the year, the country recorded a trade deficit of E909.0 million, a turnaround from the E773.6 million and E737.2 million surpluses in the same period in 20 and 2016, respectively. Earnings from the export of Miscellaneous edibles rose by a mild 7.3 per cent month-onmonth to E839.6 million in July. In the same period, textiles posted a significant 30.1 per cent increase in export earnings to E275.7 million. On the contrary, exports receipts from sugar and sugar products fell to E319.2 million in July, a 23.6 per cent decline from the previous month. South Africa remains the country s major source of imports, accounting for 76.5 per cent of total imports from January to July 20, with the top five countries (RSA, China, India, Japan, and Ireland) accounting for 87.9 per cent of year-to-date total imports. The cost of fuel imports, in July, increased by 10.7 per cent month-on-month to E262.3 million.

13 % change Per cent % change % change 13 RED July/August 20 ` Economic Policy, Research and Statistics Division Kingdom of Eswatini Economic Indicators at a glance Sectors 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 13, , , , , , , Government , , , Private sector 14, , , , , , , 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) 9, , , , , , , Annual % change in NFA Gross official foreign reserves E'Millions 7, , , , , , , Annual % change in GOR In months of import cover Exchange Rates US$ EURO GBP Public Finance Total public external debt [E' million] 5, ,1.86 4, , , , ,2.40 As a % of GDP Total public domestic debt [E' million] 7, , , , , , , As a % of GDP Total public debt [E' million] 12, , , , , , , As a % of GDP NB: For consistency, the table shows data up to the end of July 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