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Quarterly Economic Review, March 2009

Published: Tuesday June 30th, 2009

Preliminary data suggests that domestic economic activity contracted during the first quarter of 2009. Conditions were characterized by a sharp decline in tourism output, softer consumer demand and reduced stimulus to construction activity from foreign investments. However, as global price pressures further moderated, inflation trended lower, continuing to ebb from the peak levels attained during the middle of 2008. Fiscal operations remained adversely impacted by the weakness in the economy, with the comparative deficit widened during the third quarter of FY2008/09, as a result of a reduction in revenues and increased outlays. On the monetary front, the seasonal rebuilding of bank liquidity occurred within a more subdued private sector credit environment but with narrowed gains in the deposit base. Meanwhile, the reduction in domestic demand and lower oil prices contributed to a significant decline in the trade deficit and a reversal in the estimated current account balance to a modest surplus. However, the capital account surplus contracted, based on the slowdown in private foreign investment inflows.