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Indicators> Economic Indicators> Quarterly Bulletin Second Quarter 1997 |
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Quarterly Bulletin Second Quarter 1997
Volume (3) No. (2) June, 1997 Main Economic Indicators 1. Inflation Second Quarter, 1997 The Consumer Price Index (CPI) for June, the first half of 1997, stood at 162.8 level as compared to the 162.2 recorded in the previous month (May ). In March one quarter earlier the index stood at 162.0 whereas a half year earlier it stood at 161.5. One year earlier to the date the index stood at a 155.6 level. The annual comparison showed that with the exception of Clothing and Footwear, which declined by 0.80 percent, the other subgroups indicated the following increases: Food, Beverage and Tobacco 3.87 percent, Housing 13.38 percent, Furniture and Household Supplies 2.71 percent, Transportation 2.09 percent and Services 2.65 percent, and Miscellaneous 3.90 percent. The point-to-point monthly, quarterly, half yearly and annual rates of inflation stood at 0.37, 0.37, 0.80 and 4.63 percent respectively.
Inflation Rates
Annual Inflation Rates
The movement of foreign currencies against the US dollar, a key consideration in our international trade, was not substantial enough to have any serious impact during the quarter under review. The European Currency Unit (ECU) and the Japanese Yen (YEN) weakened slightly against the U.S. dollars. The Eastern Caribbean and Canadian dollars held steady against the U.S. dollar. However, the British Pound, which represent a small portion of our international trade, rose from $1.60 to $1.73 against the US dollars in the aftermath of the UK General Elections. This will have a noticable impact on loans repayments and imports from the United Kingdom.
Foreign Exchange Rates
Currencies vs United States Dollar
3. Transactions with the Rest of the World As a result of a 4.4 percent expansion in exports, in combination with 15.8 percent growth in imports, the overall balance on the major components of (tourism and financial services flows) the account of Transactions with the Rest of the World deteriorated some 18.8 percent to $18.37mn, compared to the second quarter 1996. The rise in imports comprised of a 15.8 growth in imports goods mainly for consumption and a 16.0 expansion in professional and business services, through international business services transaction. On the other hand, exports growth of 4.4 percent to $71.3mn was made up largely of a 4.1 percent rise in exports earnings, equally from tourists and financial services. Exports of goods, although a very small component, rose substantially.
Transactions with the Rest of the World
Current Account: Major Components ($'000)
Fueled by a steady NY Prime Interest Rate and expanding disposable income, loans outstanding rose 8.8 percent to $373.6mn compared to the previous quarter. With the growth of credit outpacing total deposits for the past two years, the index of loans outstanding and total deposits settled at 250 and 221, respectively. The movement in total deposits, decomposed as 6.3 percent, 5.8 percent and 7.3 percent rise in demand deposits, savings deposits and certificates of deposits, culminated in a 6.8 expansion as a result of favourable interest rates and growth in disposable income.
Money Indicators
Indices of Deposits and Loan
The number of business licenses approved amount to 31 compared with the 39 approved in the first quarter. However, mainly due to statutory requirements, there were only 384 licenses renewed compared to the 2,006 seen in the previous quarter. The number of business licenses operating is estimated at 2,832, up 1.1 percent from the second quarter amounting an index of 152 compared with the 150 seen in the first quarter. This index suggests that the number of businesses operating today has more than doubled since 1990 and is on its way to being tripled.
General Business Indicators: Trade Licenses Paid
Quarterly Issue of Trade Licenses
This surprising drop in the number of domestic companies registered is not consistent with the upsurge in aggregate economic activities in tourism and financial services. Further, we see no clear evidence of a reduction in activities related to distribution, construction and business services where the majority of corporate addresses are found. The index of domestic companies incorporated during the review period fell to 83 compared to 109 seen in the previous quarter.
General Business Indicators:
Company Registration
Current revenue of the Central Government amounted to $45.1mn, up 27.7% over the second quarter 1996. However, given $21.5mn recorded during the first quarter 1997, it is likely that some of the revenue-take in that quarter might be recorded in the review quarter. Due to approximately a 16% fall in current expenditure to $20.7mn, total expenditure fell 17.6% to $23.1mn during the review quarter. Capital expenditure jumped 46.7% to $2.4mn, but this was well below the 3.3mn seen during the second quarter 1996.
Central Government
Central Government Spending
Reversing an unusual occurance, electricity generated and consumed increased 3.4 percent and 3.1 percent respectively, compared to the first quarter 1997. However, when compared to the fourth quarter, electricity consumed and water produced grew by only 1.3 percent and 1.4 percent, respectively. Due to unsual rainfall, water produced and consumed fell by 2.0 percent and grew by 1.5 percent, respectively. The reduction in water produced came inspitee of the presence of new serious leaks in the old cast iron pipes.
Energy: Electricity and Water
Electricty and Water Activity
The number of vehicles licenced during the second quarter jumped 9.3 percent to 2,000 due mainly to a 7.2 percent rise in the number of licenced private vehicles, compared to the previous quarter. The number of transport and other vehicles rose 20.8 percent and 13.1 percent, respectively. Private cars continued to dominate holding a 74.3 percent share of vehicles licenced compared to a share of 9.3 percent and 16.4 percent for transport and other vehicles, respectively. The overall rise in vehicles licensed is attributed to growth in number operating plus a reduction in unlicenced vehicles operating on BVI roads.
Land Transport
Source: Licencing Department
Motor Vehicles by Type
With total indices of 171 and 162 for calls and call minutes (duration of calls), respectively, it is evident that telecommunications are playing a larger role in the production of services and in the ordinary life of British Virgin Islands. The growth in calls and call minutes on the international level suggests greater use by tourists and businesses. As well, the continued growth in local calls reflects growth of present and new users of the system. Overall the jump in the indicies is reflective of the expansion of the service sectors in particular and the economy in general.
Communications
Index of Telephone Calls
Compared to the previous quarter, total imports of the basic construction materials (cement and steel) rose 9.7 percent from $0.63mn, while the imports of cement fell 5.9 percent to $0.29mn, imports of steel rose 23.4 percent to $0.40mn. This import performance of steel and cement is exactly opposite to the previous quarter’s trend, and is explained only by inventory adjustment and construction technology shifts. However, construction activities in the home building sector continues to be buoyant.
Construction
Imports of Cement and Steel Bars
Overnight tourist arrivals amounted to 65,717 recording an increase of 12.7% over the second quarter of 1996 total of 58,297, but still slightly below the second quarter 1995 figure of 66,520 . Tourism receipts, also known as tourist expenditure, reached $42.5mn showing an expansion of 11.7% over the same quarter 1996. On the other hand, cruise passenger arrivals of 21,153 equaled only 71.4% of the 29,558 visiting during the second quarter of 1996.
Tourism
Tourist Visitors
13. International Business Companies The index of companies register during the review period came in at 295 under the 327 seen during the previous quarter. The second quarter of 1996 had an index of 322. On the other hand, the index of companies incorporated (companies on the books) was recorded at 554 compared with the 509 and 525 seen during the second quarter 1996 and the first quarter 1997, respectively. International Financial Sector
IBC's Registration
14. Economic Performance Summary Review A combination of positive moments in key indicators of the export and domestic service sectors of the economy was responsible for igniting the economy during the second quarter. The export sectors performance, as a result of an expansion of tourism and financial sector activities, resulted in 18.8 percent growth in the overall balance of the major components of our external accounts. Tourism export earnings rose 11.7 percent and inflows from the financial sector were up more than 9.0 over the previous quarter. The relative strength of the US dollar against key foreign currencies such as the Japaneese Yen, the British Pound and the European currency unit contained the non-USA component of our import bill as total imports increased only by 15.8 percent compared to the same period last year. Export earnings expanded 4.4 percent to $71.3 mn, triggered largely by earnings from the financial sector expanding 54 index points. A substantial portion of the $6.0mn rise in merchandise imports were for increased imports of food, consumer durables and households supplies as a result of inflation climbing to 6.50 percent from 5.58 percent. The domestic sectors were further fuelled by an 8.8 percent expansion in domestic credit to satisfy demand in home construction, commercial accommodation space and business activities. The NY Prime interest rate holding steady at 6.50 percent contributed to the expanded demand, while the supply of credit, no doubt, assisted by increased liabilities of banking sector increased, as a result of a 6.8 percent growth in total deposits. The fiscal situation in the public sector continued its outstanding performance in terms producing operating surpluses and contributing to the national capital formation. Through increased revenues of 27.7 percent and a 16.0 fall in current expenditure, the Central Government overall balances continue to be augmented at the present level of $38.0mn after contributing more than 90 percent of all capital outlays in the last 3 years. Other secondary indicators such as construction activities were up, as indicated by the 9.7 percent rise imports of basic materials and a steady prime lending rate around 8.5 percent. Electrical, energy and water consumption, all indicators of aggregate demand rose 3.1 percent and 1.5 percent, respectively aided by the upsurge in commercial and domestic demand. Telecommunication activities, another indicator of domestic demand, in terms of calls minutes, rose to 171 and 162 index points due to increased business and tourist demand. Vehicles registration, a proxy indicator for transport grew 9.3 percent while company incorporations and business licences remained just about or on par with the previous quarters. The second quarter has signalled another jump in the level of economic output compared to the previous year. The export led characteristics of the economy continue to be strengthened with strong private sector performances. The public sector, with its supportive policies, continues to buoyant and vibrant leading the economy in key productive areas such as tourism and financial services. 15. ECONOMIC OUTLOOK FOR THE THIRD QUARTER, 1997 Barring the occurrance of any interruptions of production in the key sectors of the economy, for the first time in about four quarters, output for the third quarter this year is expected to show noticeable improvement over the same period last year. Tourism, although being at its production valley, is expected to do better as a result of promotional efforts and product enhancement. However, the overall strength of the economy, through diversification, is expected to play a key role in stabilizing output just above expected seasonal levels. Domestic public and private sector investment is expected to provide fuel for the third quarter activities in services and construction. Plant rehabilitation and expansion in preparation for the upcoming tourist season should provide some investment led growth during the quarter. Domestic interest rates and inflation are likely to remain largely unaffected by global events. This will allow for expansion in domestic credit, home construction and distribution activities. The third quarter will mirror the second quarter but at a reduced level of output due to seasonality of tourism. Financial services will continue to record strong performances as investment outlays, both private and public, produce additional economic activity.
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