Uncertainties in Global Economy Risks Inflation Outlook

There are indications that the world economy is beginning to pull out of recession, because of the resilience caused by unprecedented macroeconomic policy responses of governments. The recovery is, however, expected to be uneven across countries.

According to the International Monetary Fund’s most recent World Economic Outlook, growth in the global economy is expected to contract by 1.4 percent in 2009, before expending by 2.5 percent in 2010.

On the domestic front, the Gambia’s macroeconomic programme is said to be on track. In August 2009, the IMF successfully completed the fifth review of the country’s Poverty Reduction and Growth Facility arrangement, the prospect of which remained unchanged.

Output is projected at 3.6 percent in 2009, compared to 6.1 percent in 2008, mainly attributed to the slowdown in global economic activity.

However, the steady rise in the price of crude oil and uncertainties in the global economy are risks to inflation outlook, Bamba Saho, Governor of the Central Bank of the Gambia said.

Mr. Saho, who was addressing a press conference of the Monetary Policy Committee at the Central Bank premises in Banjul last Friday, said “for the remainder of 2009, the outlook for inflation is favourable”.

“For the remainder of 2009, the outlook for inflation is favourable. However, the steady rise in the price of crude oil and uncertainties in the global economy are risks to the outlook”, he stated.

According to the Central Bank Governor, growth in the key monetary aggregates accelerated in the past year as money supply grew by 18.0 percent in the year to end July, 2009, compared to 10.1 percent a year earlier.

He said the banking industry remains fundamentally sound evidenced by the strong growth in assets, capital and reserves and the decrease in the non-performing loans ratio.

“Food consumer price inflation declined to 4.3 percent in July 2009 from 5.1 percent in July 2008. In contrast, non-food consumer price inflation rose to 3.8 percent from 2.5 percent in July 2008.

“Core inflation, which excludes the prices of energy and volatile food items, decreased to 3.1 percent in July 2009 from 4.9 percent during the same period last year”, Governor Saho told pressmen.