Monthly Economic and Financial Developments, January 2010

Published: Monday March 8th, 2010

In January, domestic economic activity continued to be adversely impacted by still fragile conditions in the global economy, although a more positive picture is emerging. Anaemic private sector demand, constrained prospects for any near-term improvements in the fiscal situation, which registered a deterioration during the first half of FY2009/2010. However, preliminary data suggests that inflation remained relatively subdued. Monetary developments featured contractions in both liquidity and external reserves, and persistent deterioration in banks’ credit arrears, given softness in business activity and elevated unemployment levels.

Provisional survey data indicated a modest improvement in hotel expenditure indicators in January, buoyed by gains in both occupancy levels and average daily rates, in contrast to 2008, when revenues contracted sharply. Nevertheless, total tourism receipts are expected to remain significantly below “pre-crisis” levels, in the near term.

Government’s fiscal gap expanded by 30.3% to $176.2 million during the first half of FY2009/2010, relative to the corresponding period a year earlier, as the rise in aggregate expenditure outweighed the modest growth in revenue. Total collections firmed by 1.2% to $628.9 million, reflecting mainly a one-time tax payment and timing-related dividend receipts, which resulted in non-tax revenue more than doubling to $129.5 million. Conversely, tax collections declined by 12.2% to $499.3 million, as the protracted downturn in consumer demand reduced proceeds from international trade & transaction taxes, as well as other “miscellaneous” stamp taxes, by 10.7% and 21.3%, respectively. Total expenditure advanced by 6.4% to $805.1 million, explained by a 36.3% increase in capital outlays to $80.4 million—primarily for infrastructural projects—and an 88.9% surge to $59.6 million, in assistance to public entities. Meanwhile, current expenditure was relatively unchanged at $665.2 million.

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