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Consumer
prices on gradual upward trajectory
The combination of higher energy prices and more accelerated currency
depreciation is beginning to put upward pressure on inflation. In
June, consumer prices rose 0.56%, which was down from the 0.74% increase
observed in the prior month. As a result of the June reading, annual
inflation rose from 4.3% in May to 4.9%. Consensus Forecast
panellists expect increased economic activity and more accelerated
currency depreciation to continue to exert upward pressure on prices.
As a result, annual inflation is expected to rise to 7.2%, which is up 0.2
percentage points from last month and at the lower end of the target range
of 7% to 11% underlying the Central Bank’s monetary policy programme for
this year. In 2005, the consumer price trend is seen as proceeding
along a similar trajectory to this year, with annual inflation seen to
reach 7.5% - up 0.2 percentage points from last month’s forecast.
Current
account surplus shrinks further
In the first quarter, the current account balance registered a surplus of
US$ 374 million, which was well below the US$ 1.5 billion expected by the
Consensus Forecast. Furthermore, the first quarter surplus was
significantly lower than the US$ 1.1 billion surplus recorded in the final
quarter of last year and well below the US$ 2.1 billion surplus registered
for the same quarter in 2003. The narrowing of the current account
surplus over last year’s first quarter balance was mainly due to a
smaller the trade surplus, which virtually halved from US$ 4.2 billion in
the first quarter of 2003 to US$ 2.8 billion. Even though export
growth remained strong with an 11.1% expansion, booming domestic demand
provided a stronger 85.7% growth spurt to imports.
The
current account surplus was complemented by a US$ 777 million capital
account surplus. The first quarter figure was considerably above the
deficit recorded in the preceding quarter (US$ 430 million) and contrasted
the large US$ 1.5 billion deficit observed in the same quarter last year.
The improvement over last year’s deficit resulted from higher net
inflows to the non-financial public sector, as the banking sector
continued to record net outflows.
This
year, Consensus Forecast participants expect the current account surplus
to narrow slightly from the US$ 6.1 billion annualized balance in the
first quarter to US$ 6.0 billion by year-end. Furthermore, according
to the Consensus, the narrowing in the trade surplus next year is likely
to reduce the current account surplus further to US$ 4.2 billion.
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