PR FROM CENTRAL BANK - The Central Bank Board of Directors at its meeting of 22 July 2016 approved the continuation of its loosening monetary policy stance for the year 2016/17.
According to the I.M.F’s July 2016 World Economic Outlook (W.E.O), the global economy is expected to grow by 3.15 percent in 2015/16, revised down from earlier estimates due to lower than expected growth estimates for both advanced and emerging economies.
The economy is expected to improve by 3.3 percent in 2015/16 due to strong growth in sectors such as Commerce, Fishing, Construction and Transport while headline inflation at end June 2016 to remain low at 0.1 percent.
Total exports of goods and tourism receipts exceeded expectations in 2015/16.
For 2016/17, real GDP is expected to grow at 1.5 percent due largely to the impending closure of the Yazaki Samoa plant in 2017, offsetting expected gains in sectors such as Construction, Communications, Transport and Commerce.
On the other hand, gross foreign reserves are expected to rebound given forecast growth in exports, visitor earnings and slowdown in foreign capital payments.
This will see international reserves recover to a level of around 4.3 months of imports in 2016/17. Headline inflation is expected to increase to 2.0 percent by end June 2017 in light of expected increases in imported prices for petroleum and food imports.
With manageable inflationary pressures and the expected comfortable level of our international reserves in 2016/17, the Board felt that monetary policy should remain loose in order to support economic growth.
Interest rates at end June 2016 are at low levels with the weighted average lending rate at 9.03 percent while average deposit rate is at 2.46 percent.
The aim is to maintain these low levels going forward to encourage lending to private businesses in order to foster domestic investment and economic activity.