The Central Bank is expecting economic growth in 2022 following the prolonged lockdown last year, but there will still be challenges because of higher prices, mainly on imported goods.
The bank made the projection in its economic bulletin for January, which was released on Wednesday.
It said expects higher natural gas production as several projects being undertaken by major energy companies are expected to kick off in fiscal 2022. These include the bp Matapal project which achieved first gas in September last year, seven months ahead of schedule, from the Savannah exploration well discovered in 2017. The initial production from this development alone is expected to be in the range of 250-350 mmscfd once all the wells are fully operational.
Internationally, demand for energy commodities owing to increased global economic activity will continue to drive prices upward, especially since the supply of energy commodities is currently constrained. The bank added that winter temperatures should also bolster prices.
In January, West Texas Intermediate (WTI) crude oil prices went up 77.2 per cent compared to last year, to about US$52 per barrel, and peaked in early February at US$90.58. The WTI price was US$89.65 on Wednesday, while Brent crude oil which averaged at US$87 a barrel was US$91.48.
The bank also expects improvements in production in the non-energy sectors as long as there are no further lockdowns or restrictions on mobility. It noted that there would be changes in the way business is done as more electronic transactions, and more business are done online. It warned that the change would pose a challenge to businesses that are slow to adapt.
International shortages owing to higher costs in freight and insurance are expected to continue in the early months of 2022. Spikes in prices of international agricultural commodities, such as grains, wheat and other major agricultural commodities that are imported would also play a part in the challenges to economic growth, it said.
The spread of the delta and omicron covid19 variants slowed global economic growth and increased uncertainty about how quickly the world could recover from the pandemic, the bank said but noted there was still steady growth amid inflation, food insecurity and climate change challenges.
Citing Ministry of Labour statistics, the bank said 1,098 people were retrenched during the first ten months of 2021. A total of 2,517 people were retrenched during a similar period of 2020. At the same time, the number of job advertisements published in the print media during 2021 declined by 16 per cent year-on-year.
While there was a resumption of business activity, the bank said there was a decline of real economic activity by three per cent compared to the same period in 2020, because of a 3.5 per cent fall off in non-energy sector production, and a decline in the energy sector by 1.9 per cent.
Global inflation in the second half of 2021 caused domestic inflation to rise above two per cent in July. Headline inflation increased to
