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Indicators> Economic Indicators> Quarterly Bulletin Second Quarter 1998 |
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Quarterly Bulletin Second Quarter 1998
Volume (4) No. (2) July, 1998 Main
Economic Indicators The Consumer Price Index (CPI) for the first half of 1998 stood at the 117.1 index level, up from the 116.0 recorded in the previous month (May). In relation to the new index (March 1995), one quarter earlier (March 1998) the index stood at 114.4 index level, whereas a half year earlier (December 1997) it stood at a 113.8 index level. One year earlier to the date the index stood at a 111.9 index level. Insofar as quarterly comparison was concerned, with the exception of Housing and Services which declined by 7.10 and 0.82 percent respectively, significant increases were recorded in the following subgroups, Food, Beverage & Tobacco 0.72 percent, Furniture & Household Supplies 18.87 percent, Clothing & Footwear 7.69 percent, Transportation 7.61 percent and Miscellaneous 3.81 percent.
Annual Inflation Rates A full reversal of the trading strength of the US dollar saw it weakened against the Yen, Pound Sterling, Canadian dollar and the European Currency Unit. This noticeable weakening of the US Dollar against currencies of the countries from which we import (Japan and the United Kingdom) and from which we borrow (European Union Countries and Canada) presented a mix impact on our economy. In terms of tourism, our vacations are cheaper, but, in terms of loans, our repayments will be higher. However, given the level of external debt denominated in foreign currencies and the level visitors from Canada and Europe, the cheaper vacations producing a greater net benefit has the edge.
Currencies vs United States Dollar
3. Transaction with the Rest of the World Rough Balance of Payments figures indicated that inflow from the export of financial and tourism services provide the lion’s share of national income. The second quarter’s overall balance of $31.9 million was the result of a 5.0 percent growth in imports and a 23.5 percent expansion in the export of goods and services when compared to the like quarter in 1997. The rise of 3.3 percent in financial and tourism services inflows contributed to the 9.8 percent overall growth in imports of goods and services. On the other hand, the 23.2 percent expansion in export services was a 23.5 percent growth in services exported and 29.1 percent fall in goods exported. Compared to the first quarter 1998, the overall balance increased 5.0 percent.
Current Account: Major Components ($’000)
A second consecutive quarter of high economic activity spurred on by a prime interest rate of 8.5 percent contributed to an overall rise in total deposits and loans outstanding. The 4.6 rise in total deposits was made up of a 20.8 percent rise, a 7.7 fall and a 4.5 jump in demand deposits, saving deposits and certificates of deposits, respectively. Compared with the second quarter 1997, the same level of prime interest rates was accompanied by increases of 26.7 percent, 9.7 percent and 30.4 percent in demand deposits, saving deposits and certificates of deposits, respectively to produce overall deposits growth of 24.8 percent. Loans outstanding registered a 28.7 percent growth with and index of 321.
Indices of Deposits and Loans
5. General Business Indicators: Trade Licences Paid The second quarter saw a decrease in the rate at which trade licences were applied for and approved from 120 to 74 compared to the first quarter 1998. Figures suggest that the number of licences renewed approximated that seen during the second quarter of 1997. The estimated number of licences operating recorded a 2.2 percent growth and 2.8 percent growth, respectively compared to first quarter of 1998 and the second quarter of 1997. The index of trade licences operating now stands at 162 compared with 158 observed at the end of the first quarter 1998.
Quarterly Issue of Trade
Licences 6. General Business Indicators: Companies Incorporated Compared to the first of quarters 1997 and 1998, the number of local companies incorporated increased 25 percent to 45. The large increase in company formation is more indicative of small numbers rather than any overall indicator of changes to economy activity. However, it does show the extent to which the corporate structure for conducting is being preferred.
Company Registration The fiscal performance of the Central Government was highlighted by small growth in current revenue, a slight fall in total expenditure and substantial fall off in capital expenditure. Review quarter figures indicate a 3.7 percent expansion in current revenue to $46.7mn compared with the second quarter 1997. Total expenditure of $30.2mn, made up of 91 percent current and 9 percent capital, fell 0.9 percent as current expenditure decreased from $5.8mn to $2.6mn compared to the second quarter 1997.
Central Government Spending 8. Energy: Electricity and Water Reflecting the high period of economic activity in the tourist season, the demand for electricity rose 8.5 percent while the supply or volume of electricity produced raised on 6.3 percent according to best estimates available. Compared to the second quarter 1997, electricity generated and consumed increased 23.1 percent and 18.1 percent, respectively. Comparison with the first quarter 1998, water produced and water consumed in U.S. gallons rose 4.3 percent and 10.5 percent, respectively. A similar comparison with figures observed at the end of the second quarter 1997, shows increases of 13.8 percent and 29.6 percent for water produced and consumed, respectively.
Electricity and Water
Activity Vehicular transport is not normally a good indicator of economic activity in the BVI but it does give some indication of what is happening in sectors such as tourism, distribution, etc. The review quarter shows that the number of registered vehicles increased 2.5 percent when compared to the previous quarter according to the best available estimates. The overall increase was made up of a 5.5 percent growth in transport vehicles, a 1.9 percent rise in the number of private cars and a 3.3 percent jump in the number of other vehicles. Compared with the second quarter 1997, the number of registered vehicles is down 1.3 percent, as a result of a 0.1 percent drop in private cars and 1.6 percent slump in other vehicles registered. This overall drop is explained by the new registration system which compelled all cars on the road to be registered in the last few years.
The convergence of telecommunications, computers and commercial activity brings into sharp economic focus the importance of the communications sector to globalization of economic activities in the British Virgin Islands. Best available data indicates that the indices of local calls, international calls and international call minutes, were observed at 174, 156 and 157, respectively compared to 170, 151 and 151 seen at the end of the first quarter 1998. The increased use of telecommunications is consistent with a shift towards use of the INTERNET for social and economic activities as well as the growth in the British Virgin Islands as a telecommunications market.
Index of Telephone Calls The import value of the package of construction materials brought into the territory during the second quarter fell 51.7 percent and 52.2 percent compared to the second quarter 1997 and the first quarter 1998, respectively. The decision by businesses not to replenish their inventories of rough lumber, nails, steel and cement after the rehabilitation from hurricane damages is mostly responsible for this substantial drop in imports of basic construction materials. Steel, PVC Pipes and Cement accounted for 73.7 percent of the package while paints accounted for another 23.0 percent. The total import package figure of $0.68mn is 19.0 less than the second quarter 1996 figure of $0.84mn. (in US$)
Imports of Construction
Materials Overnight arrivals during the second quarter amounted to 72,163 and represented a 9.8 percent increase and 9.5 percent fall compared to the second quarter 1997 and first quarter 1998, respectively. Tourism receipts registered an increase of 9.2 percent and a decrease of 12.2 percent compared with the second quarter 1996 and the first quarter 1998, respectively. Overall, tourist arrivals amounted to 87,243 recording a 1.0 percent growth over the second quarter 1996 figure of 86,324. First quarter 1998 arrivals were observed at 126,027 of which 36.7 percent or 46,310 were cruiseship arrivals. Cruiseship arrivals for the review quarter amounted to 17.3 percent or 15,080 of all visitor arrivals. Tourism receipts for the BVI amounted to $46.35mn during the review period.
13. International Financial Services The financial services sector continues to grow beyond expectations in response to government’s serious effort at promotion, regulation and product diversification. Second quarter incorporations, although somewhat below first quarter figures, give an indication of the strength of the BVI industry in the future. Financial Services Department figures for the second quarter 1998 shows that quarterly registrations are more than three times in the level seen at the end of the first quarter 1991. Similarly the total number of companies carried on the register are about 739 times those accumulated at the end of the first quarter 1991.
IBC’s Registration 14. Economic Performance Summary Review The net trade position of the British Virgin Islands continued moderate improvement on the overall trade balance recorded at the end of the first quarter 1998. Balance of Payments with the Rest of the World increased 5.0 percent to $31.9 million as a result of a 23.2 percent expansion in exports of tourism and financial services in combination with an overall 5.0 percent jump in imports of goods and services. Export services were lead by a small increase in tourist arrivals and a 12.3 percent advance in financial services inflows. The Consumer Price Index continued to edge upwards coming in, up 4.31 percent on an annualized basis. All sectors except housing moved upwards noticeably. The noticeable weakening of the U.S. dollar against the currencies of our major trading partners is likely to impact negative on official debt payments and positively on tourist inflows. Domestic credit and investment in housing continue to propel domestic investment replacing a slight fall off in public sector capital outlays. A prime interest rate fixed at 8.5 percent no doubt contributed to the 6.8 percent rise in loans outstanding to $480.9 million while a 4.6 percent growth in total deposits to $842.1 million further increased the money supply. The 7.7 percent decline in savings went into increased consumer spending. The fiscal performance of the Central Government continued to be well in surplus as current revenue expanded 3.7 percent to $46.7 million while total expenditure amounted to $30.6 million as a result of heavy financial services revenue flows and unexpected levels of tourist and expenditure based revenues. Capital expenditures fell to $2.6 million from $5.8 million in the pervious quarter. Construction communications and transportation all recorded expanded output during the review quarter as their linkages with housing, tourist activities and general economic activity resulted in greater activities. Consumption of electricity and water rose 10.3 percent and 10.5 percent respectively, further indicating their positive linkages with tourism and financial services.
15. Economic Outlook for the Third Quarter 1998 Subject to the seasonality of tourism and the arrival of the summer hurricanes, slightly less than moderate overall economic growth is expected. International financial services are expected to propel the economy as tourism goes into its off season. Cruiseship activity is expected to drop off substantially as major construction is to take place on the Road Town cruiseship peer. However, the level of home construction seen in past two quarters is expected to accelerate slightly as expanded credit to that sector suggests. Economic expansion in the commercial and public sectors are not expected to be noticeable unless the public sector investment programme is accelerated, and that is doubtful given that most projects are early in the pipeline or still in their planning phases. The fiscal balances of the public sector should improve due to inflows from financial services and the slow pace of capital spending. The transport and utilities sector will not do as well as construction because of their direct links with tourism and weaker linkages with financial services. Consumer spending will, as usual, reflect its seasonality associated with tourists activities.
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