By Kefiloe Kajane
The Central Bank of Lesotho (CBL) says the global economy has shown some signs of recovery.
This was revealed this week by CBL governor Dr. Retṧelisitsoe Matlanyane, who said the recovery has largely been underpinned by steady gains in vaccinations, sizeable fiscal stimulus packages and a general pickup in global demand.
She also said despite the improvements, global growth prospects in the near-term remain highly uncertain and uneven across countries.
According to Matlanyane, growth remains vulnerable to new mutations of the virus, vaccine availability and lack of uniformity in rates of country vaccinations.
However, she said further downside risks include global trade tensions, limited policy space and possible tightening of containment measures as infections rise.
“The CBL’s Quarterly Indicator of Economic Activity (QIEA) reflects that domestic economic activity increased by 0.2 per cent in the first quarter of 2021, relative to a 2.2 per cent growth in the quarter ending December 2020. This was mainly a result of the reintroduction of Covid-19 induced restrictions in the review period.
“The domestic economic recovery remains largely conditional on developments related to potentially stronger and prolonged rise in virus infections, Covid-19 containment measures and the rollout of vaccines. In the first quarter of 2021, domestic labour market conditions remained weak in all the three sectors that are monitored by the Bank.
“This was primarily on account of Covid-19 lockdown restrictions. The rate of inflation, as measured by the year-on year percentage change in consumer price index (CPI), was 6.7 per cent in April 2021, compared to 6.5 per cent in March of the same year. The increase emanated from both food and non- food components of the CPI basket. The broad measure of money supply declined by 1.3 per cent in the first quarter of 2021, from an increase of 9.9 per cent in the previous quarter,” she said
Matlanyane explained that the decrease was due to a four percent growth in total banking sector net domestic assets, which was moderated by a 0.8 per cent rise in the sector’s net foreign assets.
She also explained that the private sector credit extended by banks fell by 0.1 per cent in quarter one, after contracting by 0.5 per cent in the fourth quarter of 2020.
She said the loans and advances extended to business enterprises increased by 1.1 per cent in quarter one, compared to a 3.1 per cent decline realized in the fourth quarter of 2020.
“Conversely, total credit granted to households fell by 0.5 per cent in quarter one, relative to an increase of 0.5 per cent in the quarter ending December 2020. The current account recorded a surplus equivalent to 1.1 per cent of GDP in the first quarter of 2021, from a deficit of 1.8 per cent of GDP in the preceding quarter.
“The improvement in the current account was driven mainly by the performance of the trade and income accounts. Consequently, the gross international reserves, as measured in months of import cover, rose to 4.5 months in the first quarter of 2021, compared to 4.3 months in the previous quarter. The Government budgetary operations recorded a fiscal deficit equivalent to nine per cent of GDP during the first quarter of 2021, as opposed to a revised fiscal surplus of 12.9 per cent of GDP in the last quarter of 2020,” she said.
