gambia quarterly economic bulletin june 2009- part one

8/14/2019 Gambia Quarterly Economic Bulletin June 2009- Part One

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The Gambia Monthly Economic Bulletin- June 2009

THE GAMBIA MONTHLYECONOMIC BULLETIN 1

PART-ONE

June 2009

Institutional Support Project for Economic and Financial Governance (ISPEFG)Department of State for Finance and Economic Affairs (DOSFEA)

The Republic of GambiaThe Quadrangle, Banjul, the Gambia

1 The Gambia Monthly/ Quarterly Economic Bulletin provides an update on recent economicdevelopments and policies in the Republic of the Gambia. The Bulletin is prepared by a research teamcomprising Tamsir Cham, Director; Momodou Taal, Principal Economist, Amie Khan, Senior Economist,and Ceesay Chiel, Economist in the Economic Management and Planning Unit (EMPU) and Tarun Das,Macroeconomic Adviser (ISPEFG); Ministry of Finance and Economic Affairs (MOFEA); with keyinputs from the Debt Management Adviser, Fiscal/Financial Adviser, the Central Bank of Gambia (CBG),the Gambian Bureau of Statistics (GBOS), and the Gambian Revenue Authority (GRA).

Any questions and feedback can be addressed to: Either Tamsir Cham ( [email protected] ) or Tarun Das ( [email protected] )

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mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Political and Administrative Structure

The Gambia is divided into seven regions comprising two Municipalities namely, Banjul CityCouncil (BCC) and the Kanifing Municipal Council (KMC) and five provincial administrativeregions namely, Western Region (WR), North Bank Region (NBR), Lower River Region (LRR),Central River Region (CRR) and Upper River Region (URR).

Politically, the relevant units are Local Government Areas (urban), Districts, Wards and Villages.The Gambia has 35 districts and about 1870 villages with an average of 13 compounds.Basic Facts about Gambia:Fiscal year: 1 st January to 31 st DecemberItems (Year) Units Value Rank in the World

from topin descending order

Area (2009) Sq. km. 11,300 171 out of 248countries

Population (2008) Million 1.735 148 out of 241countries

GDP PPP (2004) Million US$ 3284 167 out of 224countriesGDP Nominal (2006) Million US$ 511 199 out of 229

countriesGDP PPP per capita (2004) US$ 1945 177 out of 223

countriesGDP per capita (2006) US$ 329 192 out of 207

countriesPoverty Ratio (% of people Percent 59 7 out of 59 countries

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below One-US$) (2000)Source: http://www.nationmaster.com

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http://www.nationmaster.com/http://www.nationmaster.com/http://www.nationmaster.com/


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____________________________________________________________ Contents

Items Page

ISPEFG Project/ Research Team and Document History 4Highlights 5-7

At a Glance 8-11

1. Global Economic Outlook and Global Public Policy

1.1Sustained weakness and risk in global output and trade in 20091.2 Recent economic developments and prospects1.3Can green shoots turn into glooming daffodils?1.4 Global Commodity Prices and Inflation1.5 Trends of international crude oil prices

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1215151718

2. Current State of the Gambian Economy

2.1Overall and Sectoral GDP Growth Rates2.2 Growth Rates of Selected Indicators for Trade and Transport2.3Consumer Price Index (CPI) and Inflation2.4Factors affecting inflation and Anti-inflationary Measures2.5 Projection of CPI inflation for the year 20092.6Government Fiscal Performance2.7Projections of Fiscal Outturn for 20092.8 External Debt Situation2.9Domestic Debt and Outstanding Treasury Bills2.10Treasury Bills Yields2.11 Money Supply2.12 Sectoral Distribution of Bank Credits2.13 Commercial Banks Assets2.14Commercial Banks Liabilities2.15 Interest Rates and CBG Policy Rates2.16Balance of Payments and Foreign Exchange Reserves2.17 Exchange Rates

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2022252728293133343637383940414244

3. Assessment of Quantitative Targets agreed with IMF under MEFP 45-46

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ISPEFG Project and Monthly Report Research Team

Project Supervisors Honorable Mr. Mod A. K. Secka,Permanent Secretary-IandHonorable Mr. Serign Cham,Permanent Secretary-II

Project Coordinator Mr. Momodou Cham

Director (EMPU)Principal EconomistSenior EconomistEconomistTechnical Assistant (Debt Management)Technical Assistant (Fiscal/ Financial)Technical Assistant (Macroeconomic)

Mr. Tamsir ChamMr. Momodou TaalMs. Amie KhanMs. Ceesay ChilelMr. Adam AikutaMr. Dan Mambule MwanjeMr. Tarun Das

Document History:

This report is an update of the following reports prepared by the Research Team:

1. The Gambia Quarterly Economic Bulletin, pp.1-30, 31 March 2009.2. The Gambia Monthly Economic Report, pp.1-18, 31 March 2009.3. Fiscal Performance in the First Quarter of 2009, pp.1-4, 16 April 2009.4. The Gambia Quarterly Economic Bulletin-An Update, pp.1-40, 30 April 2009.5. The Gambia Monthly Economic Report, pp.1-38, 30 April 2009.6. The Gambia Monthly Economic Report, pp.1-39, 31 May 2009.7. The Gambia Monthly Economic Abstract, pp.1-15, 31 May 2009.8. The Gambia Monthly Economic Bulletin, Part-1, An Update, pp.1-20, June 2009.9. The Gambia Monthly Economic Bulletin, Part-2, An Update, pp.1-20, June 2009.

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HIGHLIGHTS

Impact of Global Financial Crisis and Economic Slowdown

As per the latest IMF World Economic Outlook (April 2009) projections, world output is projectedto decline by 1.3 percent in 2009 as a whole and to recover gradually in 2010, growing by only

1.9 percent. In African developing economies, growth is projected to slow down significantly from5.2 percent in 2008 to 2 percent in 2009.

In a recent interview, Federal Reserve Chairman Ben Bernanke remarked that the "greenshoots" of economic revival are already evident. The basic question arises- Can these greenshoots turn into blooming Daffodils? A close examination of the recent economic data leads tothe conclusion that the economic turnaround is mixed and may be short lived. There are somegreen shoots that can be spotted in the Purchasing Managers Index (PMI) and the business andconsumers confidence indicators. But to consider these as turning points for the business cyclewill be premature.

Food and Oil Prices

Due to sluggish demand and economic slowdown, there had been significant decline of worldcommodity prices including food and petroleum since August 2008.

At the beginning of 2009, given weakness in the Chinese demand and negative growth in the USand EU and OPECs decision to have no supply cuts, global crude oil prices were projected toremain soft and rule around $51 per barrel in 2009. However, since April 2009 petroleum pricesstarted rising and increased to US$60/barrel in May 2009 and US$70/barrel in June 2009.

Impact on the Gambian Economy

A global crisis of this magnitude is bound to have adverse impact on any country. The Gambianeconomy was not an exception and witnessed sharp decline in exports, remittances, foreigninvestment, tourist arrivals, manufacturing production and wholesale and retail trade during 2008.

However, thanks to bumper crops contributed by favorable monsoon and very good performanceby electricity, telecom and financial sectors, the real GDP growth at factor cost improved from6.1% in 2007 to 7.2% in 2008, supported by a spectacular growth of 28.4% in agriculture output.

Even though the Gambian economy was relatively insulated from the first round effects of theglobal financial crises, the spread of the financial crisis to the real sectors of the global economyhas impacted the manufacturing, services and trade sectors in the Gambian economy. Inparticular, exports, retail trade, tourism and foreign direct investment (FDI) have declined sincethe second half of 2008 due to weak global demand.

Due to fall in exports, tourists income and foreign investment, real GDP growth rate in 2009 isexpected to decelerate to a range of 3.6% to 4.5%, aided by a growth of 4% to 6% in agriculturevalue added, 2% to 2.4% in industry and 2.4% to 4.4% in services.

CPI Inflation

Annual point-to-point CPI inflation accelerated from 1.6% (Food 1.9% and non-food 1%) in May2008 to 5.9% (Food 7.1% and non-food 4.5%) in May 2009. The 12-month average inflation ratealso accelerated to 5.8% in May 2009 from 4.9% a year ago.

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Government Financial Performance

Government Financial Performance was mixed in the first half of 2009 (Jan-June 2009) than inthe first half of last year (Jan-June 2008). In Jan-June 2009 revenue and grants increased by15.5% aided by 13.3% increase in taxes, 8.9% increase in non-taxes and 63.7% increase ingrants over Jan-June 2008.

However, on overall, there was a fiscal deficit of 198 million Dalasi in Jan-June 2009, higher thanthe fiscal deficit of 86 million Dalasi in Jan-June 2008, due to significant increase of capitalexpenditure by 55.2% in Jan-June 2009 over Jan-June 2008, (compared to a decline by 19% inJan-June 2008 over Jan-June 2007).

Domestic Debt and Treasury Bills Yields

At the end of May 2009, outstanding domestic debt stood at D5.6 billion (amounting to 28.4% of GDP), down by 5.5% from the outstanding domestic debt at D6 billion (amounting to 33.3% of GDP) a year ago. Treasury bills accounted for 84.5% of total domestic debt at the end of May2009, compared to 80.4% a year ago.

Yields on treasury bills fluctuated widely in recent months. Despite significant decline of CPIinflation from 7% in January 2009 to 5.9% in May 2009, Average yield on the 91-day increasedfrom 10.5% in Jan 2009 to 12.5% in May 2009, yield of 182-day bills increased from 12.1% to13.8% and that of 364-day bills increased from 14.4% to 15.3% over the period.

Money Supply and Bank Credits

Annual growth rate of broad money supply (M3) accelerated from 7.5% in May 2008 to 17.3% inMay 2009, supported by 18.1% growth in currency, 10.4% growth in demand deposits, 10.8%growth in savings deposits and 38.1% growth in time deposits. On the demand side, growth wasmainly due to 35% growth in domestic credits.

Domestic credit increased from D5.2 billion in May 2008 to D7 billion in May 2009, supported by44.1% growth in government borrowing, 67.3% growth in credits to public entities and 33.3%growth in credits to the private sector.

The Banking sector continues to function efficiently with sufficient capital and liquidity. Theindustrys risk-weighted capital adequacy ratio stood at 34.84% in March 2009, significantlyabove the statutory requirement of 8%. The ratio of non-performing loans declined from 9.4% inDecember 2008 to 7.2% in March 2009.

Loans and advances totaled D3.74 billion in March 2009 from D2.7 billion in March 2008reflecting increased credit to all major sectors of the economy. Credit to agriculture, fishing,manufacturing and building and construction increased by 66.2%, 17.8%, 76% and 39.3%respectively over last year. Similarly, loans and advances to transportation, distributive trade,

tourism and financial institutions grew by 27.4%, 27.5%, 16.5% and 61.3% respectively during thesame period.

Commercial Banks Assets and Liabilities

Gambian banks were least affected by global financial crisis as the Gambian banks do not havelarge exposure to foreign assets or liabilities. Total assets of the industry increased to D12.5billion for March 2009, or by 0.8% from December 2008. At end- May 2009, foreign assetsconstituted only 7.5% of total assets and external liabilities constituted only 1.5% of total liabilities.

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Interest Rates and Central Bank Policy Rates

Given the acceleration in inflation and the weakening of the Dalasi, the MPC decided to increasethe Rediscount Rate by one percentage point to 16.0% in October 2008. The CBG policy rate hasremained unchanged at 16% since then.

Despite significant fall of the inflation rate since January 2009, Treasury bill yields, short-termdeposit rates and commercial banks lending rates remain very high leading to wide interest ratespreads and high cost economy. Appropriate monetary measures are necessary to reduce theshort-term deposit rates and the lending rates.

Balance of Payments

Balance of Payments estimates indicate an overall deficit of D767.3 billion (-) $34.2 million) in2008 compared to surplus of D741.7 million ($29.8 million) in 2007, reflecting the deterioration inboth current and capital accounts. The Net Usable Reserve of the CBG stood at US$95.6 millionat end-March 2009 and was above the IMF Program target (floor) by US$3.6 million.

Provisional balance of payments estimates for the first quarter of 2009 indicate an overall deficitof D468.9 million (US $17.9 million) compared to D7.42 million (US $0.34 million) in the firstquarter of 2008. The current account deficit, including official transfers, amounted to D234.3million compared to a surplus of D4.94 million a year ago. The capital and financial accountwidened from a deficit of D12.36 million in the fourth quarter of 2008 to D234.53 million in the firstquarter of 2009.

Revised balance of payments projections by the CBG indicate an overall deficit of D13.8 million(US$0.5 million) in 2009 compared to D811.30 million (US$30.3 million) in 2008. The currentaccount deficit, including official transfers is expected to widen to D3.8 billion (19% of GDP) in2009 from D3.6 billion (17.8% of GDP) in 2008. The capital and financial account balance isexpected to improve from a surplus of D2.7 billion in 2008 to D3.8 billion in 2009.

Foreign Exchange Reserves The volume of transactions in the inter-bank foreign exchange market totaled D33.3 billion

(US$1.4 billion) in January-May 2009 compared to D36.5 billion (US$1.7 billion) a year ago. Atend-May 2009, gross international reserves stood at D2.6 billion (US$119.7 million) equivalent to4.0 months of import cover.

Exchange Rate

Between December 2008 and January 2009, the Dalasi appreciated against the British Pound,US dollar, Euro and Swedish kroner by 7.2%, 1.8%, 6% and 9.1% respectively.

However, the trend was reversed since February 2009l with Dalasi depreciating against these

currencies. In May 2009, the Dalasi depreciated against the British Pound, Swedish Kroner, CFAFranc and euro by 6%, 1.4%, 1.4% and 4.8% respectively. In contrast, Dalasi appreciated againstthe US dollar and Swiss franc by 0.2% and 2.6% respectively in May 2009.

Overall Outlook

Prospects of the Gambian economy in the second half of 2009 are considered to be brightwith rise of investment and output in all sectors and deceleration of inflation rate.

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At a Glance- June 2009EconomicIndicators

LatestReference

Period

Status in thelatest reference

period

Status in theCorresponding

period in theprevious year

Outlook for 2009

1. Real Sector Growth Rates (in percentage)

Real GDP (FC)Growth rate (%)

Calendar year 2008

Overall 7.2Agriculture 28.4Industry 0.7Services (-) 0.6

Overall 6.1Agriculture 3.9Industry (-) 3.1Services 10.4

Overall 3.6 to 4.5Agriculture 4.0 to 6.0Industry 2.0 to 2.4Services 2.4 to 4.4

2. Growth rates of selected indicators for transport and communication (in percentage)

Ports cargounloaded

Calendar year 2008

9.5 11.8

Ports cargoloaded

2008 20.9 -9.8

Total cargohandled at ports

2008 10.6 9.3

Growth rate of portscargo may decline.

Quantity of riceimports

2008 30.9 166.8

Quantity of flour imports

2008 -100.0 -10.9

Quantity of sugar imports

2008 -10.8 83.4

Quantity of cement imports

2008 28.7 19.3

Quantity of POLimports

2008 6.5 -8.2

Growth rates of rice andcement may decelerate,while growth rates of sugar and POL mayimprove.

Total cargohandled by air

2008 -3.2 -31.1

Total mailhandled by air

2008 -53.8 65.6

Total air-flights2008 -5.4 -6.4

Arrivingpassengers

2008 -21.9 19.0

Originatingpassengers

2008 -15.7 14.8

Total air passengers

2008 -18.9 16.9

Growth rates of air cargoand passenger trafficmay improve by the endof 2009 if the developedcountries startrecovering in the lastquarter of 2009.

Total touristarrivals

2008 -5.0 14.3 Tourists arrivals may godown.

Vehiclesimported

2008 -27.0 18.4

Total licensedvehicles

2008 2.5 2.8Likely to remain stable.

Fixed telephonesubscribers

2008 4.5 4.8 Likely to remain stable.

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At a Glance- June 2009 ContinuedEconomicIndicators

LatestReference

Period

Status in thelatest reference

periodin 2009

Status in theCorrespondingperiod in 2008

Outlook for 2009

3. Inflation rate (in percentage) and Crude Oil price (in US$/ barrel)CPI inflation (%) May 2009 Overall 5.9

Food 7.1Non-food 4.5

Overall 1.6Food 1.9Non-food 1.0

Expected to decline inthe remaining months of the year

Brent crude oilprice (US$/ brl)

June 2009 Average US$50 Average US$132 May stabilize aroundUS$60 by the end-2009

4. Government fiscal operations - Percentage change over previous periodRevenue & grants Jan-June 2009 15.5 -1.2

Dom. Revenue Jan- June 2009 12.9 -3.8Tax Revenue Jan- June 2009 13.3 -0.3Nontax Rev Jan- June 2009 8.9 -26.3

Grants Jan- June 2009 63.7 102.5Exp & Net Lending Jan- June 2009 20.4 14.7

Current Exp Jan- June 2009 6.3 29.3Per. Emoluments Jan- June 2009 18.0 34.0Other Charges Jan- June 2009 -1.2 57.7Interest Jan- June 2009 6.3 -5.9

External Jan- June 2009 22.7 -23.5Domestic Jan- June 2009 2.1 0.1

Cap Exp & NL Jan- June 2009 67.8 -16.7Cap. Expenditure Jan- June 2009 55.2 -18.9Net Lending Jan- June 2009 144.4 -0.8Overall Bal Jan-June 2009 129.7 -144.4Basic balance Jan-June2009 125.3 -88.1Basic Pr. Balance Jan-June2009 24.7 -54.5

Fiscal performance in thefirst half of 2009 i.e. Jan-June 2009 was mixed ascompared with theBudget estimates.Better performance byrevenue items in Jan- June2009 compared to that inJan- June 2008.However, on overall, therewas a fiscal deficit of D198million in Jan-June 2009,higher than the fiscal deficitof D86 million in Jan-June2008, due to significantincrease of capitalexpenditure by 55.2% inJan-June 2009 over Jan-June 2008

5. Government fiscal operations as percentage of GDP at current market pricesRev. and grants Jan-June 2009 11.1 10.7Exp & Net Lending Jan-June 2009 12.1 11.2

Interest Jan-June 2009 2.1 2.2Overall fiscal bal. Jan-June 2009 -1.0 -0.5Basic Balance Jan-June 2009 0.8 0.4Primary Bas. Bal, Jan-June 2009 2.8 2.5

As % of GDP at currentmarket prices, revenues,expenditures and basicbalance are off-track .

6. Outstanding Domestic Public Debt in Million DalasiTreasury bills May 2009 4772 4806Sukuk Al-Salam May 2009 76 47Govt Bonds May 2009 250 250NIB Treas. Notes May 2009 547 873Total (Million D) May 2009 5645 5977

Outstanding treasurybills are expected todecline .

As % of GDP May 2009 28.4% 33.3% Likely to decline in 2009.7. Composition of Outstanding Domestic Public Debt (Percentage share in total)

Treasury bills May 2009 84.5 80.4Sukuk Al-Salam May 2009 1.4 0.8Govt Bonds May 2009 4.4 4.2NIB Treas. Notes May 2009 9.7 14.6Total May 2009 100 100

Share of non-interestbearing Treasury notesis expected to decline.

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At a Glance-June 2009 ContinuedEconomicIndicators

LatestReference

PeriodStatus in the

latest referenceperiodin 2009


Outlook for 2009

8. Yields of Treasury Bills (in Percentage)

91-days May 2009 12.5 10.2182-days May 2009 13.8 11.3364-days May 2009 15.3 13.0

Yields may come downas CPI inflation hasstarted decelerating.

9. Annual Growth Rate of Money Supply (Percentage)

Broad Moneysupply (M3)

May 2009 17.3 7.5

Reserve Money May 2009 8.9 -5.9

Broad money growthrate is likely todecelerate.

10. CBG Policy Rates and Banks Lending rates (Percentage per annum)

CBG Bank rate June 2009 10 10Rediscount rate June 2009 16 15Bank lendingrate

June 2009 18 to 27 18 to 27

Banks lending rates maydecline if the credit ratingsystem is strengthened.

11. Share of Banks Foreign Assets/ Liabilities in Total Assets/ Liabilities (%)

Foreign assets May 2009 7.5 11.7Foreign liabilities May 2009 1.5 2.8

Likely to remain stable

12. Sectoral distribution of bank credits (in percentage)

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Agriculture March 2009 6.7 7.9Fishing March

20090.6 0.5

Manufacturing March2009

3.7 4.7

Building March

2009

10.7 10.7

Transportation March2009

9.5 8.6

Trade March2009

25.5 23.2

Tourism March2009

8.0 6.7

Financial Inst. March2009

3.2 3.6

Other comm. March2009

19.8 17.6

Others March2009

12.3 16.5

Total credits March2009

100.0 100.0

Bank credits toagriculture andmanufacturing are risingat faster rate in 2009,while trade, commercialactivities, and

construction attractmajor shares of bankcredits, indicating somerevival of investment andeconomic activities in2009.

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At a Glance-June 2009 ContinuedEconomicIndicators

LatestReference

PeriodStatus in the

latest referenceperiodin 2009


Outlook for 2009

13. Balance of Payments (Million US Dollar)

Goods A/C Bal. 2008 (-) 156.0 (-) 166.3Goods exports 2008 141.6 132.2Goods imports 2008 297.6 298.5Services, net 2008 59.6 66.8Tourism 2008 72.4 75.1Official transfer 2008 6.1 5.2Remittances 2008 53.3 38.8Income, net 2008 (-) 33.8 (-) 44.6

Likely to remain under pressure.

Current A/C Bal 2008 (-) 49.5 (-) 58.8Overall BOP Bal 2008 (-)34.2 29.8Foreign Exch.Reserve

End Dec2008

125.2 159.4

Equi. to monthsof imports c.i.f.

End Dec2008

5.7 6.2Likely to deteriorate

further in 2009.

14. Inter-bank Exchange Rate- End Period Mid-Market RatesDalasi per unit of foreign currency

UK May 2009 40.20 40.25US$ May 2009 26.78 20.64CHF May 2009 22.75 19.46Euro May 2009 36.09 32.10CFA (5000) May 2009 256.38 245.84

Dalasi is likely todepreciate against major currencies during theyear 2009.

15. Annual Appreciation (-)/ Depreciation of Dalasi per unit of foreign currencyAt the End of the period

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UK May 2009 -0.1 -24.6US$ May 2009 29.7 -24.5CHF May 2009 16.9 -12.0Euro May 2009 12.4 -11.9CFA (5000) May 2009 4.3 -11.9

Dalasi is likely todepreciate against major currencies in the secondquarter.

16. Foreign Exchange Reserves (US$ Million)

ForeignExchangeReserves

End-May2009

119.7 140.4 Likely to remain under pressure.

1. Global Economic Outlook and Global Public Policies1.1 Sustained weakness and risk in global output and trade in 2009

The global economy is presently passing through a critical conjecture affected adversely by a

massive financial crisis and severe recession. As per the projections made by the IMF in their latest World Economic Outlook: Crisis and Recovery April 2009 2, world output is projected todecline by 1.3 percent in 2009 as a whole and to recover only gradually in 2010, growing byonly 1.9 percent (Table-1.1) . Achieving this turnaround will depend on stepping up efforts toheal the financial sector, while continuing to support demand with monetary and fiscal easing.

This is the first global contraction in the last 60 years since the great depression in 1930s.Global real sectors and financial markets continue to weaken both in advanced and emergingeconomies. Trade volumes continue to shrink rapidly, while production and employment datasuggest that the global activity continues to contract in the current quarter. Recent data point tosustained weakness in the period ahead (Figure-1).

Africa and the Middle East: In African developing economies, growth is also projected to slow significantly from 5.2 percent in 2008 to 2 percent, while growth in the Middle East is projected to decline from 5.9 percent in 2008 to 2.5 percent in 2009 (Table-1.2) . In Africa, growth isexpected to moderate particularly in commodity exporting countries, and several countries areexperiencing declining exports and lower inflows of tourism income, remittances, and foreigndirect investment (FDI), while aid flows are under threat. In the Middle East, the effects of thefinancial crisis have been more limited so far. Despite the sharp drop in oil prices, governmentspending is largely being sustained to cushion the toll on economic activity.

Prospects of the Gambian Economy: As per the IMF estimates, the real GDP growth in theGambia decelerated from 6.3 percent in 2007 to 5.9 percent in 2008 and is projected todecelerate further to 4 percent in 2009 (Table-1.2) due to adverse impact of the global financialcrisis and economic slowdown.

2 World Economic Outlook: Crisis and Recovery, April 2009, IMF Washington D.C.

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Figure-1: Trends of Global Growth Rates and World Trade

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Table 1.2 Growth Prospects of African Economies

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1.2 Recent Economic Developments and Prospects

Internationally, economic activity continued to decline in the first part of 2009 . Althoughtensions on international financial markets have eased to some extent, equity markets haverallied, and there are tentative signs of stabilization in the economies of key countries includingthe US; the adverse impact of the crisis on the global economy has continued in the first 5months of 2009,. GDP fell 5.7, 9.7 and 14.2 percent respectively in the first quarter in the US,the Euro zone, and Japan. In recent months, the decline in output continued, even though therate of decline appears to have come down. The weak global environment has had a major impact on Chinas exports and the economy more generally.

Financial markets in industrialized countries have become less strained since early 2009, withtension in inter-bank markets receding and equity markets having rallied. However, marketshave not stabilized fully. Risk aversion is still high, reflected in reluctance among banks to lend.International capital flows in particular are still very subdued, and the corporate sector in manydeveloping countries has difficulties getting access to finance. Moreover, additional shocksoriginating in the financial system cannot be ruled out.

There are also some tentative signs of stabilization in parts of the global economy.Although global output has continued to decline in the first quarter of 2009, there are signs of sequential (month on month) moderation in the rate of decline and possible prospects of stabilization of activity. Some green shoots have been observed in the US, including in retailsales, home sales and factory orders. Recently business sentiment in the US and Europe hasalso improved, although most business surveys are not yet indicating sequential growth. And,globally, orders have rebounded sequentially.6 Several East Asian countries have seen outputrising recently, grounded in part in a sharp acceleration in high tech manufacturing. But a rapidglobal economic recovery seems unlikely and a lot of uncertainty remains. Prospects for 2009 for global growth and trade have again been downscaled, compared to three months ago,in large part because of a sharper than expected decline in the end of 2008 and early 2009. Inthis light, eventual sequential stabilization of activity does not necessarily presage a rapid,sustained recovery. Moreover, in most developing countries and emerging markets outside of East Asia there are no strong signs yet of improvements in the economy. That is because muchdeteriorated access to external financing and a smaller or less effective policy stimulus than inmany industrialized countries are constraining domestic demand. The world excluding China isnow expected to shrink by 3 percent in 2009, before posting moderate growth in 2010 (weightedby the geographical composition of Chinas exports, projected world growth looks slightly better,because of East Asias relatively good prospects).

1.3 Can Green Shoots Turn Into Blooming Daffodils?

In a recent interview, Federal Reserve Chairman Ben Bernanke remarked that the "greenshoots" of economic revival are already evident. The basic question arises- Can these green

shoots turn into blooming Daffodils?

A close examination of the recent economic data leads to the conclusion that the economicturnaround is mixed and may be short lived. There are some green shoots that can be spottedin the Purchasing Managers Index (PMI) and the business and consumers confidenceindicators. But to consider these as turning points for the business cycle will be premature.Restructuring and restoration of the financial systems which collapsed in this crisis would takemore time than that can be anticipated through these indicators. Expecting the blossoming of daffodils with these green shoots would not be right at this juncture at least in the near future.

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Let us first start with the Purchasing Managers Index (PMI) which provides an idea of theoperating conditions in the manufacturing sector. Euro zone powerhouse Germany, whichregistered a negative growth (-3.8%) in its real GDP in the first quarter of 2009, the sharpestcontraction in nearly four decades, witnessed the biggest one month gain in its seasonally-adjusted Market Purchasing Managers Index in more than seven years. The PMI rose from32.4 in March 2009 to 35.4 in April 2009. A reading above 50 indicates that manufacturingsector is expanding and reading below 50 indicates that the sector is contracting. In the US alsothe level of contraction has reduced with PMI registering an increase to 40.1 in April 2009 from36.3 in March 2009. In Japan, the Nomura/JMMA PMI in April 2009 registered the largest gain inthe last eight years and rose to 41.4 from 33.8 in March 2009. China saw its PMI rise for the fifthconsecutive month to 53.5 in April 2009 as compared to a record low level at 38.8 in November 2008. India also saw its PMI at an expansionary phase at 53.2 in April 2009.

The confidence of businesses and consumers seems to be coming back. This can besomewhat corroborated with the different confidence indicators. In Germany, the IFO businessconfidence index rebounded to the highest level at 83.7 in April 2009 since last November 2008(85.9). The Institute of Supply Management, US also saw a boost in its business confidencewith the index touching the highest level in April 2009 (40.10) since September 2008 (43.4). In acomposite global survey by Bloomberg for its Professional Global Confidence Index, saw anincrease in its overall index by 17.5 points in May 2009 from April 2009, which was the highestincrement seen in a month from November 2007. In China, the business confidence has alreadybeen in an optimistic mode for the last two, whereas in India and Japan, the index hit high levelin the month of May 2009 since October 2008.

In the case of consumer confidence, Michigan consumer confidence survey in the USAregistered its highest level since September 2008. According to Nielsen global consumer confidence index of 50 countries, only 35 percent of the Chinese citizens felt that their economywould contract. This optimism can also be substantiated by the auto sales in China which canbe considered a strong indicator of recovery. According to China Association of Automobile

Manufacturers, the 2009 first quarterly auto sales in China registered 6% annual increaseleading to China overtaking the USA for the first time as the Worlds largest auto market. InEurope, Germanys consumers are not that confident about the economy with the GfK'sconsumer confidence index remaining steady during February to April 2009. Another confidencereport across 16 nations in Europe shows that in April the consumer and executive sentimentswere above the median estimate of 65.6 at 67 which is also above the March 2009 index.

In terms of retail sales the picture looks different with scarcely any green shoots. In the UK, theannual growth of total retail sales for March 2009 showed a modest increase of 1.5%. In the USand Germany the seasonally-adjusted data on retail and food services sales for April 2009 sawa fall of 0.4% and 1% over March 2009 and a fall of 10.1% and 1.5% over last year. Overallretail sales in 15 nations Euro zone also dropped. The Chinese retail sales climbed for the

fourth consecutive month with April 2009 sales growth around 15.5% over last year.

Export data provides some hope as some bottoming out has been seen in the month-on-monthdata. Germany saw its export growth rise by 0.7% on a seasonally- adjusted monthly basis,although year-on-year exports slumped by 16%. Exports in the US plummeted to a two year lowin March 2009 by 2.9% whereas in the Euro zone the 16 countries saw a rise in exports for thesecond consecutive month in March 2009. Japan also saw its exports rise in March 2009, ascompared to previous month, but exports sharply fell by 46% on year-on-year basis. China alsosaw its seasonally adjusted exports rise month on month by 6.9% in April 2009 whereas it

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slumped by 22.6% over last year. Indias contractionary phase of exports has been continuingfrom October 2008 onwards with March 2009 exports plunging the most by 33.3%.

One of the areas where more weeds have been spotted than green shoots is the industrialproduction. Japan which is already contracting faster than other economies saw its industrialgrowth shrinking to 18.1 % (Q1 2009) quarter on quarter, and the year-on-year growth alsocontracting by 34.5%. In Germany, quarter-on-quarter industrial growth slumped by 12 % (Q12009). This gloominess also encompasses Europe which recorded its worst industrial growth(-20.2 %) in more than two decades in March 2009. In India also the gloomy scenario persistswith negative industrial growth in the last few months with the March 2009 contraction of industrial production at 2.3% being the worst in last 14 years. Chinas data indicates thatdaffodils would grow. Chinese industrial growth during January-April 2009 is estimated at 5.5%,compared to 7.3% in April 2008.

In terms of unemployment the scenario is not at all encouraging. In the recently released OECDdata, the US, the UK, Germany and Japan all saw an increase in their unemployment rate in themonth of March 2009 at 8.5% (4.6%), 6.6% (5.3%), 8.4% (7.6%) and 4.8% (3.9%) respectivelyas compared to March 2008 (in brackets are the March 2008 unemployment rates).

1.3 World Commodity Prices and Inflation

As a result of the sharp downturn in global demand, commodity prices, especially for energy,declined significantly since the last quarter of 2008 . Inflationary pressures had subsided in themajor advanced economies . There are also significant declines of housing prices in someadvanced countries, showing signs of deflation.

Inflation will continue to retreat due to the combination of lower commodity prices and increasingeconomic slackness, with deflation risks growing in advanced economies. IMF forecastsindicate that G-7 deflation vulnerability has risen above its previous peak, reflecting high risks inJapan and the United States and moderate risks in several euro area members including

Germany, Italy and France.

Inflationary pressures also subsided in the low and income economies . Although commodityprices recorded some increase in January 2009, they declined again during Feb-April 2009.With some evidence of green shoots in the developed countries, most of the commodity pricesshowed some upward trends in May 2009 (Table-1.3).

Global price prospects are receiving a lot of attention. Prices of most raw commodities havecome off earlier lows in international markets, with some, including the oil price, having risensignificantly recently. However, they are still much lower than their peaks of mid-2008.Forecasters do not expect commodity prices to rise significantly from current levels in thecoming one and a half year. As to global headline prices, the combination of large global

downturn and very aggressive policy responses in many countries, notably the US, has incitedconcerns of both global deflation and inflation.

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1.4 Trends of International Crude Oil Prices

During 2008 Brent crude oil prices ruled very high until July 2008 when prices increased to $147per barrel. However, due to global financial crisis and economic slowdown oil prices starteddeclining thereafter.

A recent report from the Paris based International Energy Agency (IEA) has projected that theworld oil demand in 2009 will decline by half a million barrels per day (bpd). In their last meeting,the OPEC has decided not to have any cut in oil supply. Accordingly, oil prices are expected toremain soft in the rest of the year 2009.

In March-April 2009 Brent crude oil prices ranged around US$47 per barrel. Given weakness in theChinese demand and negative growth in the US and EU and OPECs decision to have no supply cuts,global crude oil prices were projected to remain soft and rule around $51 per barrel in 2009. However,

since April 2009 petroleum prices started rising and increased to US$60 per barrel in May 2009 and ruledaround US$70 in June 2009.

Trends of Monthly Brent Crude Oil Prices (US$/ barrel)

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Table-1.3 Trends of World Commodity PricesQuarterly averages Monthly averages

Apr-Jun

Jul-Sep

Oct-Dec

Jan-Mar

Apr-Jun Apr May Jun

Commodity Unit 2008 2008 2008 2009 2009 2009 2009 2009EnergyCoal, Australia a/ $/mt 138.65 162.80 92.97 71.93 66.48 63.56 64.50 71.38

Crude oil, Brent a/ $/bbl 122.39 115.60 55.89 44.98 59.13 50.85 57.94 68.62Crude oil, Dubai a/ $/bbl 116.67 113.47 53.67 44.56 58.93 50.18 57.40 69.21Natural gas, Europe a/ $/mmbtu 12.40 14.62 15.75 11.94 8.18 8.51 8.09 7.95Natural gas, US a/ $/mmbtu 11.35 9.03 6.40 4.57 3.71 3.50 3.81 3.81Beverages Cocoa b/ /kg 276.4 282.6 224.1 259.7 258.7 258.1 247.5 270.4Coffee, Arabica b/ /kg 315.1 321.2 267.8 283.9 320.2 297.4 332.9 330.2Tea, Mombasa auctions b/ /kg 221.6 252.8 190.8 214.9 228.0 221.0 222.3 240.8Fats and Oils Coconut oil b/ $/mt 1,499 1,246 772 677 781 747 843 754Copra $/mt 1,013 817 520 447 513 499 559 480Groundnut oil b/ $/mt 2,328 2,417 1,773 1,283 1,165 1,187 1,157 1,151Palm oil b/ $/mt 1,198 928 512 577 744 702 801 730Soybean oil b/ $/mt 1,466 1,353 830 755 859 801 892 885Soybeans b/ $/mt 585 566 377 394 460 414 465 502Grains

Barley b/ $/mt 239.1 216.6 129.5 116.3 129.5 111.3 128.7 148.5Maize b/ $/mt 259.0 244.7 168.4 166.9 176.0 168.5 179.9 179.5Rice, Thailand, 35% $/mt n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.Sorghum $/mt 246.9 214.7 151.0 145.3 148.1 154.1 160.1 130.0Wheat, US, HRW b/ $/mt 346.5 317.7 228.1 231.6 250.5 234.2 262.3 255.1Wheat US SRW $/mt 277.8 241.5 182.7 187.4 195.6 182.6 202.5 201.7Other Food Bananas EU $/mt 1,263 1,123 944 1,142 1,280 1,292 1,286 1,262Fishmeal $/mt 1,185 1,198 1,023 1,013 1,096 1,040 1,103 1,146Meat, beef b/ /kg 332.7 372.4 268.0 245.2 262.8 255.5 263.7 269.2Meat, chicken b/ /kg 167.9 177.1 174.7 173.5 174.1 171.2 174.5 176.7Meat, sheep /kg 493.2 477.3 410.0 378.5 428.8 404.4 427.7 454.4Oranges b/ $/mt 1,322 1,163 842 799 864 905 888 798Shrimp, Mexico b/ /kg 1,109 1,048 1,014 976 970 970 970 970Sugar EU domestic b/ /kg 77.59 74.70 51.97 51.44 53.75 52.09 53.84 55.34Sugar, world b/ /kg 27.01 31.14 26.28 28.85 33.89 30.09 35.36 36.22

Raw Materials Logs, Cameroon $/cum 554.4 548.5 473.8 426.8 394.6 382.5 395.4 406.0Plywood /sheets 647.3 648.6 645.5 572.8 565.5 567.7 565.9 562.7Sawnwood, Cameroon $/cum 1,052.3 974.5 770.8 689.2 721.4 684.3 717.6 762.5Cotton Memphis /kg 171.6 170.0 130.1 129.8 142.4 135.6 150.2 141.4Rubber RSS1, US /kg 311.7 329.1 202.8 165.8 187.0 183.6 189.8 187.6FertilizersDAP b/ $/mt 1,191.6 1,153.7 663.3 362.2 303.6 335.4 297.5 277.8Phosphate rock b/ $/mt 367.5 409.2 371.3 193.3 113.3 125.5 117.5 96.9Potassium chloride b/ $/mt 511.1 635.0 766.7 865.2 726.7 745.0 717.5 717.5Urea b/ $/mt 575.7 745.4 292.2 267.3 241.1 245.2 240.8 237.4Metals and Minerals Aluminum b/ $/mt 2,940 2,787 1,821 1,360 1,485 1,421 1,460 1,574Copper b/ $/mt 8,443 7,680 3,905 3,428 4,663 4,407 4,569 5,014Gold $/toz 896 870 795 909 922 890 929 946Iron ore b/ /dmtu 140.6 140.6 140.6 101.0 101.0 101.0 101.0 101.0

Lead b/ /kg 230.7 191.2 124.5 115.7 149.9 138.3 144.0 167.4

Nickel b/ $/mt 25,682 18,96110,84

310,47

112,92

0 11,16612,63

5 14,960Silver /toz 1,720 1,495 1,020 1,265 1,376 1,252 1,411 1,466Steel cr coilsheet c/ $/mt 900 1,100 1,100 1,033 700 700 700 700Steel, rebar c/ $/mt 838 934 630 473 450 425 450 475Steel wire rod c/ $/mt 950 1,135 1,200 1,200 1,007 1,100 1,020 900Tin b/ /kg 2,265 2,051 1,310 1,103 1,351 1,174 1,379 1,499Zinc b/ /kg 211.3 177.0 118.5 117.2 147.3 137.9 148.4 155.7

Source: World Bank Pink Sheet July 2009

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2. Current State of the Gambian Economy2.1 Overall and Sectoral GDP Growth Rates

The sharp decline in global economic activity had also adverse impact on the Gambianeconomy in 2008 leading to decline of exports and remittances and decline of manufacturing production and wholesale and retail trade.

However, thanks to bumper crops contributed by favorable monsoon at home and highinternational prices of food grains, and very good performance by electricity, telecom andfinancial sectors, the real GDP growth at constant 2004 factor cost improved from 6.1%in 2007 to 7.2% in 2008 (Table-2.1 and Figure-2.1).

Figure 2.1 Trends of Sectoral Growth Rates 1998-2009

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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Year 1998-2009

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GDP Agriculture Industry Services

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As per the Provisional Estimates of the GBOS, the 7.2% growth in real GDP in 2008 wassupported by a spectacular growth of 28.4% in agriculture value added and a marginalgrowth of 0.7% by industry while services value added declined by (-) 0.6% due to poor performance by trade and public administration.

Share of agriculture increased from 26.3 percent in 2007 to 31.5 percent in 2008, whileshare of industry declined from 15.1 percent in 2007 to 14.2 percent in 2008 and shareof services declined from 58.6 percent in 2007 to 54.3 percent in 2008. Increase of agricultural share was contributed by increase in share of crops, while decline of services share was mainly due to decline of share of wholesale and retail trade.

Agriculture is expected to perform well in 2009, but due to higher base in 2008 theagricultural growth will be moderate in 2009. It is projected that real GDP growth rate in2009 is likely to be in the range of 3.6% to 4.5% aided by 4% to 6% growth inagriculture, 2% to 2.6% growth in industry and 2.4% to 4.4% growth in services.

However, donors commitment to provide financial support to Gambia under PRGF andto help Gambia to mitigate adverse impact might boost both consumer spending andinvestment and might enhance economic growth further.

Table-2.1: Sectoral Growth Rates and Shares in GDP in the Gambia in 2005-2009 (in %)Sectoral GDP Growth Rates

(in percentage)Sectoral Shares in GDP

(in percentage)Items 2006

Actual2007

Actual2008

Actual2009Proj.

2009IMF-Proj

2006Actual

2007Actual

2008Actual

2009Proj.

GDP at 2004 FC 6.6 6.1 7.2 4.5 3.6 100.0 100.0 100.0 100.0Agriculture and allied 3.9 3.9 28.4 6.0 4.0 26.9 26.3 31.5 32.0

-- Crops 4.1 4.3 45.7 7.4 4.0 16.0 15.7 21.3 21.9-- Livestock 3.0 4.0 3.0 3.1 4.0 8.5 8.4 8.0 7.9

-- Forestry 3.0 -4.0 1.0 2.7 3.0 0.6 0.6 0.5 0.5-- Fishing 7.3 3.2 3.5 3.5 3.0 1.8 1.7 1.7 1.6

Industry 18.5 -3.1 0.7 2.0 2.6 16.6 15.1 14.2 13.8-- Mining and quarrying 7.7 6.9 6.0 7.5 2.0 1.7 1.7 1.7 1.7

-- Manufacturing -0.5 1.4 -2.5 -2.2 4.0 5.6 5.3 4.8 4.5-- Electricity, gas, water 6.0 17.0 15.0 10.0 5.0 0.8 0.9 1.0 1.0-- Construction 40.0 -9.8 0.0 2.5 5.0 8.6 7.3 6.8 6.6

Services 5.7 10.4 -0.6 4.4 2.4 56.4 58.6 54.3 54.2-- Wholesale/retail trade -1.5 7.1 -12.9 -1.8 2.7 24.5 24.6 20.0 18.8-- Hotels/ restaurants 0.9 1.7 3.0 3.0 -10.0 2.5 2.4 2.3 2.3-- Transport / storage 5.7 8.5 6.0 4.4 3.5 3.6 3.7 3.6 3.6-- Telecom

18.0 25.0 10.0 10.0 4.0 9.4 11.1 11.412.0

-- Financial 18.2 12.8 14.5 12.0 1.0 8.2 8.7 9.3 10.0-- Real est., business 6.9 3.1 3.0 4.1 1.0 3.7 3.5 3.4 3.4-- Public administration 0.0 8.0 0.0 2.0 5.0 2.1 2.1 2.0 1.9

-- Other service 11.1 4.5 2.4 3.1 3.0 2.4 2.4 2.3 2.2Source: Gambian Bureau of Statistics (GBOS) for the years 2006-2008 and projections for 2009 by theMacroeconomic Advise and the IMF Mission to the Gambia in May 2009.

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2.2 Growth Rates of Selected Indicators for Trade and Transport

Table 2.2 presents growth rates for selected indicators in transport and communications sectorsduring the years 2005 to 2008. It is evidenced by the table that the Gambian economy wasadversely affected to some extent by the global financial crisis and economic slowdown in 2008.However, there was mixed performance for the ports traffic.

(1) While the growth rate of ports cargo unloaded decelerated, that of ports cargo loadedand total cargo handled at the Banjul seaport improved in 2008 indicating someimprovements in re-exports.

(2) There were significant imports of rice, cement and petroleum products in 2008, whereassugar and vehicles imports declined and there were no imports of flour as a result of bumper agricultural production at home.

(3) Both the cargo and passengers handled at the Banjul airport declined in 2008. Thetourist arrivals to the Gambia also declined in 2008.

(4) Growth rates of vehicles registered and fixed telephone connections deceleratedmarginally in 2008.

Table 2.2 Growth rates of selected indicators for transport and communications (%)

Items 2005 2006 2007 2008

(1) Ports cargo unloaded 4.4 2.7 11.8 9.5(2) Ports cargo loaded -11.6 41.1 -9.8 20.9(3) Total cargo handled at ports 2.8 6.0 9.3 10.6(4) Quantity of rice imports 53.3 -77.5 166.8 30.9(5) Quantity of flour imports 15.8 21.2 -10.9 -100.0(6) Quantity of sugar imports -37.1 -5.8 83.4 -10.8(7) Quantity of cement imports 31.9 -26.2 19.3 28.7(8) Quantity of POL imports -13.0 26.9 -8.2 6.5(9) Total cargo handled by air -25.7 14.0 -31.1 -3.2(10)Total mail handled by air -1.8 -13.9 65.6 -53.8(11) Total Air flights -8.2 7.2 -6.4 -5.4(12)Arriving passengers -0.3 14.7 19.0 -21.9(13)Originating passengers 6.2 3.3 14.8 -15.7(14)Total air passengers 3.0 8.7 16.9 -18.9(15)Total tourist arrivals 19.8 15.7 14.3 -5.0

(16)Vehicles imported -18.6 480.5 18.4 -27.0(17)Total licensed vehicles 2.5 2.9 2.8 2.5(18)Fixed telephone subscribers 4.8 20.5 4.8 4.5

Source: Gambian Bureau of Statistics (GBOS)

gambia quarterly economic bulletin june 2009- part one

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