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Indicators> Economic Indicators> Quarterly Bulletin Third Quarter 1998 |
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Quarterly Bulletin Third Quarter 1998
Volume (4) No. (3) September, 1998 Main
Economic Indicators The Consumer Price Index for the third quarter of 1998 (September), stood at 118.1 up from 117.6 index level recorded in the previous month (August). In relation to the new index base (March 1995), a quarter earlier (June 1998) the index stood at 117.1, whereas one year earlier to the date the index stood at a 112.2 index level. On an annual comparison all the subgroups with the exception of the Housing subgroup which declined by 7.10 percent, indicated significant increases; Food, Beverage & Tobacco 2.95 percent, Furniture and Household Supplies 16.46 percent, Clothing & Footwear 14.36 percent, Transportation 17.14 percent, Services 2.89 percent, and Miscellaneous 6.55 percent. The point-to-point monthly, quarterly and annual rate of inflation stood at 0.43, 0.85 and 5.26 percent respectively.
The slide of the U.S. dollar against the currencies of our major trading partners (European Union, Canada, United Kingdom and Japan) continued during the reporting quarter. Figures indicate 2.2 percent, 20.5 percent, 1.7 percent and a 3.2 percent decline against the European Union, the Canadian, the United Kingdom and the Japanese currencies, respectively. The weakened US dollar is sure to benefit European and Canadian tourist visiting the British Virgin Islands as their stay bills will be cheaper in the peak quarter for tourism. On the other hand, the official and private purchase of foreign currencies to pay for good and services, including the external debt of the Central Government, will be negatively impacted.
Currencies vs United States Dollar
3. Transaction with the Rest of the World Compared to the corresponding quarter of the previous year, the balance on tourism, financial and business services amounted to $16.8 million, up 7.8% , as a result of a 15.6% rise in exports to $69.3 million coupled with an 11.0% expansion in imports to $49.1 million. The 11.0% rise in imports came as a result of 10.3% growth in goods imported and 30.6% rise in services imported in response to the growing financial services sector. On the other hand, exports overall growth of 15.6% were broken down as an 11.8% fall in goods exported and 15.8% expansion in services imported.
Current Account: Major Components ($’000)
With the prime interest rate remaining at 8.5 percent for the third consecutive quarter, total deposits and loans outstanding recorded indices of 298 and 332 compared 276 and 321 recorded at the end of the previous quarter. The rise of 10.6 percent in total deposits comprised a 0.8 percent fall in demand deposits, a 5.7 percent expansion in savings accounts, and a 16.3 percent jump in certificates of deposits compared to the previous quarter according to provisional figures. Compared to the third quarter 1997, total deposits have risen 34.8 percent from $383.9 million as its components demand deposits grew 20.0 percent, savings deposits expanded 13.0 percent certificates of deposits expanded 34.8 percent. Loans outstanding grew 27.2 percent and 3.5 percent when compared with the third quarter 1997 and the second quarter 1998, respectively.
Indices of Deposits and Loans
5. General Business Indicators: Trade Licences Paid Several key indicators signalled the continued confidence investors and consumers have in the BVI’s economy. The number of trade licences approved, the number of licences operating and similarly the index of licences operating rose 2.7%, 3.9% and seven (7) points, respectively over the second quarter 1998. Interestingly though, the number of licences renewed amounted to only 43.5% of number renewed during the second quarter. Compared to the corresponding period in 1997, trade licences approved more than doubled, the number of licences operating jumped 19.4% and the index of companies operating rose 20 points, respectively confirming the slow, steady build up of confidence in the economy.
Quarterly Issue of Trade Licences
6. General Business Indicators: Companies Incorporated The number of companies incorporated for doing business in the domestic economy was slightly less than the amount seen in the previous quarter, and equal to the number seen in the third quarter 1997. The 45 companies incorporated bring the quarterly index of companies to 145.
Company Registration
At the close of the review quarter, Central Government’s fiscal performance was characterised by slight declines in expenditure and a sharp decline in revenue. Current revenue stood at $26.2mn, a notable fall of 43.9% when compared to the previous quarter’s intake. Compared to corresponding quarters from previous years, it represents a 12.5% increase over 1996 and a 18.1% decrease from 1997. A slight fall off in current expenditure and moderate increase in capital expenditure allowed total expenditure to fall by a modest 0.18%, reaching $30.5mn at the close of the quarter. This amounts to respective decreases of 12.0% and 13.5% when compared to corresponding quarters in 1996 and 1997.
Central Government Spending
8. Energy: Electricity and Water Compared to the corresponding quarter 1997, electricity generated and consumed rose 27.2% and 30.3% respectively. No doubt these huge increases over the like period last contributed to national power outage during peak demand in selected areas. This is further supported by 5.8% and 12.6% increases in electricity generated and consumed in the reporting quarter over the previous quarter, respectively. Water produced and consumed rose substantially over the same period last year as indicated 27.8% and 32.6%, respectively. As well, water produced and consumed during the reporting period grew 14.9% and 11.2% over the previous quarter reflecting in part increased domestic demand.
Electricity and Water Activity
Over the past 10 quarters vehicular traffic has grown with the overall economy but at a slower rate. With the substantial betterment of roads, vehicular traffic and number of vehicles registered have increased noticeably. The period under review shows a 5.1% increase in transport vehicles, a 2.6 % jump in private vehicles and a 3.5% expansion in other vehicles, compared to the second quarter 1998. Compared to the third quarter 1997 transport vehicles, private cars and other vehicles grew 15.0%, 8.0% and 28.8%. The overall increase between the third quarter 1997 and the reporting period amounted to 11.6% or 201 vehicles.
Motor Vehicles by Type
Best available data suggests that there is a constantly growing use of telecommunications in the lives of residents of the British Virgin Islands as well as in the growth of the financial and the business communities. The indices of local calls, international calls and international call minutes rose from 174, 156 and 157 to 177, 159, and 160, respectively. The observed increases in both local and international calls reflect our increasing use of electronic commerce and computers throughout institutions of government and businesses.
Index of Telephone Calls
The import bill for the package of selected construction materials, excluding structural steel, which was previously included, jumped 17.1% to $797,099 over the second quarter 1998. Disaggregating the package of selected materials shows that steel and cement rose 45.9% and 56.2% while imports of PVC pipe rose and paint fell 39.1% and 33.0%, respectively. No doubt the overall rise in the imports of construction materials is reflective of increased construction activity and the expansion in mortgage credit. (US$ dollars)
Imports of Construction Materials
Tourist arrivals, demonstrating the usual seasonality, for the first time in the past 10 quarters, fell 12.1 percent below the like period in the previous year. The 44,765 visitors during the review quarter amounted to a 19.6 percent increase over the 37,434 seen in the third quarter 1996. Preliminary figures indicate that tourist expenditure rose 27.3 percent compared with figures observed at the end of the third quarter 1996, and fell 5.4 percent below that of the third quarter 1997. There were virtually no cruiseship passengers during the review quarter compared to the 15,080 in the second quarter 1998 and 7,795 in the third quarter 1996.
Tourist Arrivals
13. International Financial Services Financial services activities, as measured by the incorporation and registration of International Business Companies (IBC’s), continue to expand in terms of its contribution to Balance of Payments credits. Although the level of quarterly incorporations from time-to-time, the overall registration from period to period continues to be very positive fuelling the national economic engine. The index of companies incorporated during the review quarter moved slightly from 739 to 769 while the index of registration jumped similarly from 395 to 458. The index is based on the number of companies incorporated and registered during the first quarter 1990. 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 Led by a sharp increase in the overall balance on the tourism and financial services export earnings, the BVI strengthened its overall net trade position with the Rest of the World as revised Balance of Payments figures jumped from $5.5 mn to $29.2mn. The export economy was led by a 19.7 percent expansion in services receipts as a result of a 4.7 percent growth in overnight tourist arrivals and a better than expected out-turn in registration of international business companies. Cruiseship arrivals were also up 23.1 percent over the corresponding reference quarter while overnight arrivals amounted to 80,000. In terms of transactions with the Rest of the World, compared with the fourth quarter 1997, imports of goods grew 9.4 percent to $57.0mn while exports of services expanded 19.7 percent to $104.4 mn. The strengthening of the US dollar against the Japanese, European and British currencies assisted in reducing payments for imports but this however made our export services slightly more expensive for nationals in those capitals. On the domestic side there were three areas of noteworthy performance: the Central Government fiscal accounts, prices and credit. The Central Government continued its generation of surpluses on the current accounts with revenue growing at 15.5 percent and expenditure expanding by under 9.0 percent allowing for the financing of its public sector investment programme. On the private sector side, the expansion of domestic credit by 6.4 percent mainly for home construction, commercial activities, particularly distribution was responsible for the growth in aggregate demand. The simultaneous growth of the money supply (through total deposits to $850.2mn) with a steady prime interest of 8.5 percent propelled the expansion of domestic credit and savings. 15. Economic Outlook for the Fourth Quarter 1998 The commencement of another tourist season, the end of the year public sector spending and the usual fourth quarter upturn in economic activities promise a very good quarter for the economy. The external balances of the economy are expected to be good as tourism inflows get into high gear and the present accelerated flows in financial services continue. Our Balance of Payments is sure to improve its net position mostly because a large net flow from services is expected. The large net flow is expected as a result of the good performance of the international financial services sector. As well, the fiscal accounts of the Central Government are expected to be well in surplus at the end of the year. Although there will be increased spending, a large surplus is expected to build up as a result of under-implementation, of the Public Sector Investment Programme (PSIP) and the good performances of the tourism and financial sectors. On the domestic scene, earlier expanded credit by financial institutions for the construction sectors will now be turning into real output. This means homes and office accommodation will come on stream. As well, consumption spending will get a big boost from the Christmas holdings spending. With extra cash in the hands of consumers, spending will get a big boost. Lastly Public Sector Investment Programme spending to finish the year will also help in making the fourth quarter probably the best one for growth this year.
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