THE economy showed signs of steady growth in 2023.
While economic indicators remain positive, vigilance is advised going forward into 2024
This was the view expressed by the Central Bank in its final monetary policy announcement (MPA) for the year.
The bank said the latest data from the Central Statistical Office (CSO) indicated that real GDP (Gross Domestic Product) expanded by three per cent (year-on-year) during the first quarter of 2023.
Indicators monitored by the bank suggest steady economic recovery during the first nine months of 2023.
This growth was led by the non-energy sector.
Activity in the transportation and storage, wholesale and retail trade (excluding energy), electricity and water (excluding gas) and construction sectors continued to underpin the non-energy sector’s positive performance.
Labour market statistics showed that the unemployment rate declined to 3.7 per cent in the second quarter of 2023 compared with 4.9 per cent one quarter earlier.
The bank said information from the CSO showed inflation continues to be moderate.
According to the CSO, headline inflation measured 1.1 per cent (year-on-year) in November compared with 4.1 per cent three months earlier.
The deceleration was driven by lower food inflation which slowed to 0.8 per cent from 5.6 per cent over the same period. Core inflation (which excludes food items) slowed to 1.2 per cent from 3.7 per cent, as the full pass-through of higher fuel prices implemented in late 2022 was complete.
The bank said there was an uptick in producer prices from 2.0 per cent in March to 2.6 per cent in June, while price increases for building materials (3.1 per cent) continued to decelerate over this quarter.
With respect to financial indicators, the bank continued, liquidity remains ample.
Commercial banks’ excess reserves at the Central Bank stood at a daily average of $4.9 billion in November.
While there is positive economic activity locally, the bank said, "Ongoing and emerging geopolitical factors are clouding the external economic policy outlook for 2024."
The bank added, "In particular, the unsettled geopolitical landscape, accentuated by the conflict in the Middle East and a slew of national elections scheduled for 2024, has heightened economic uncertainty."
The events referred to here include the ongoing war in Ukraine, the Israel-Gaza conflict which began in October and presidential elections scheduled to be held in the United States and Venezuela next year.
The bank said the dynamic nature of external economic developments this year, their repercussions on the economy and uncertainty with respect to ongoing or new external events, require it to maintain continued vigilance and agility to respond to potentially rapidly changing circumstances in 2024.
Against this background, the bank is maintaining the repo rate at 3.5 per cent.
The next MPA is scheduled for March 28, 2024.
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