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Indicators> Economic Indicators> Quarterly Bulletin First Quarter 1999 |
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Quarterly Bulletin First Quarter 1999
Volume (5) No. (1) April, 1999 Main
Economic Indicators The Consumer Price Index (CPI) for the first quarter of 1999 (March) stood at a 120.1 whereas the previous month (February) stood at a 119.6 index level. A quarter earlier the index stood at a 119.3 index level and a year earlier (March 998) a 114.4 index level. With the exception of Services which declined by 0.36 percent and Housing and Transportation which remained unchanged, all the other subgroup recorded the following increases: Food, Beverage & Tobacco 1.42 percent, Furniture & Household Supplies 1.65 percent, Clothing & Footwear 0.43 percent and the Miscellaneous subgroup 0.69 percent. The point-to-point monthly, quarterly, and annual rate of inflation stood at 0.42, 0.67, 4.98 percent respectively.
Annual Inflation Rates
The review witnessed the continued strengthening of the US dollar against the Euro, the Canadian dollar and the British Pound; however, it weakened slightly against the Yen. These movements in the key foreign currencies are likely to impact on our European based tourism and trade in goods and other services. As well, European currencies denominated loans will require fewer dollars for amortization. The Japanese Yen, unlike the other key currencies, continued to strengthen as it has done over the past three quarters.
Currencies vs United States Dollar
3. Transactions with the Rest of the World Compared to the first quarter 1998 the overall balance on major items of trade in goods and services jumped 21.5% to $35.5m according to preliminary estimates. This noticeable increase is no doubt related to the good tourist season and the continued outstanding performance of the financial services sector. Compared with the review quarter, total imports rose 3.9% and 8.3% in the first quarter 1998 and the 4th quarter 1998 respectively. During these periods the imports of goods rose 2.1% and 0.8% compared with services which rose 47.1% and 9.4%, respectively. The exports of services lead by financial services grew 8.8% compared with figures observed during the 4th quarter 1998. Tourism services represented more than 45% of all exports during the review period.
Current Account: Major Components ($’000)
The index of loans outstanding jumped from 276 to 297 as the volume of loans outstanding grew 7.6% to $443.9m in the review quarter compared to the fourth quarter 1998. Similarly, the index jumped from 255 to 297 as loans outstanding increased 16.5% from $381.0m in the first quarter 1998 compared with the review period. Unlike total loans outstanding, total deposits fell 0.7% to $877.2m with the index falling from 289 to 287 in the review period compared to the fourth quarter 1998. However, compared to the first quarter 1998, total deposits rose 9.0% from $804.9m. The unusual fall in total deposits came as a result of a 6.1% fall in certificates of deposits held by the four commercial banks and the Development Bank of the Virgin Islands. Demand deposits and savings deposits grew 14.0% and 3.8% in the review quarter compared to the fourth quarter 1998, respectively. For the similar categories of deposits there were growth rates of 36.8% and 8.3% in the review period compared to the first quarter 1998.
Indices of Deposits and Loans
5. General Business Indicators: Trade Licenses Paid The index of trade licences operating rose to 177 from 158 and 171 in the first and fourth quarters of 1998. The number of trade licences approved amounted to 60, 82, and 86 in the first and fourth quarters of 1998 and the review quarter, respectively. The total number of trade licences estimated to be operating were 2,966, 3,201 and 3,316 for the first and fourth quarters of 1998 and the review quarter, respectively. The increase during the review period over the previous quarter was 4.6%.
Quarterly Issue of Trade Licences
6. General Business Indicators: Companies Incorporated The formation of local companies for commercial activities in the British Virgin Islands continued at an improved pace over the past three (3) quarters. For example, we experienced a 17.9% growth in companies formed between the review quarter and the fourth quarter of 1998. Compared to the first quarter of 1997 and 1998, there is obviously a noticeable increase in company formation as evidenced by indices of 109 and 81, respectively. The index of local companies formed during the review period stands at 228.
Company Registration
Central Government revenue rose as total expenditure dropped in the review quarter compared to first quarter 1998. Current revenue rose 8.7% and 25.6% compared to the first and the fourth quarters 1998, respectively. On the other hand, total expenditure fell 8.8% and rose 42.2% compared with the first and fourth quarters of 1998, respectively. Current expenditure fell 5.9% and rose 29.4% during the review period compared with the first and fourth quarters of 1998. Capital expenditure amounted to $4.6m compared to $5.8m and $6.5m seen in the first and the fourth quarters of the previous year.
Central Government Spending
8. Energy: Electricity and Water Electrical energy produced and consumed gives a good idea what is happening with aggregate demand in the economy. Figures from the British Virgin Islands Electricity Corporation indicate a 9.0% and 3.0% growth in electricity generated. On the other hand, figures from the same sources reveal that electricity consumed rose 12.7% and 8.9% during the review quarter compared to the first quarter 1998 and the fourth quarter 1997, respectively. Water procured and distributed by the Water and Sewerage Department increased 6.4% and 4.5% over the first quarter 1998 and the fourth quarter 1998 compared with the review quarter, respectively. Water consumed from the Water and Sewerage Department jumped 6.6% and 3.7%, respectively during the same comparative periods.
Electricity and Water Activity
The number of automobiles registered to operate on the roadways of the British Virgin Islands continues to expand quarter after quarter bringing with it obvious traffic congestion in the residential and business areas. The number of transport vehicles and private cars continue to lead the expansion of vehicular traffic as evidenced by the 5.8% and 2.9% growth, respectively seen in the review quarter over the fourth quarter 1998.
Motor Vehicles by Type
The sustained upwards movement in the indices of telecommunications confirms its importance to economic development in the British Virgin Islands. Consistent with the past six quarters, the indices of local and international calls rose to 184 and 169, from 181 and 164, respectively. The index of international call minutes rose from 163 to 167 during the review quarter compared with the fourth quarter 1998. The expansion in telecommunications use is consistent with growth in international financial services, tourist activities, INTERNET use and domestic economic activity.
Index of Telephone Calls
Imports of the package of selected basic construction materials fell 5.7 percent compared to the previous quarter as inventory run down, cheaper sources of material and a slight fall off in infrastructure construction activities were observed.
The most notable fall off came in the imports of cement causing an overall decline given that it represented 42.4 percent of the selected package in the previous two quarters, on average. The slight fall-off in construction activities in the first quarter was unexpected, but resulted because of the slower than envisaged implementation of the public sector investment programme. (US$ dollars)
Imports of Construction Materials
The tourism sector was characterized by noticeable increases in overnight visitors, tourist nights, tourism receipts and cruiseship visitors compared to the corresponding quarters in 1997 and 1998. Along with the return of all tourism plant to the market were increases of 8.1% and 8.3% in overnight arrivals compared to the first quarter of the two previous years, respectively. Tourist nights rose 9.8% and 10.5% compared with the initial quarters of 1997 and 1998, respectively. Tourism receipts rose 10.1 % and 11.6% compared to the like quarters in 1997 and 1998 while cruiseship visitors rose sharper from 46,310 in the first quarter 1998 to 71,261 in the review quarter.
Tourist Arrivals
13. International Financial Services The formation of companies for the purposes of doing business outside of the BVI under our International Business Services Act continued to be the backbone of the financial services sector as the number of companies on the books are more than eight times the number in January 1990. The rate of company formation continues to be steady coming in at an index of 331 compared to what was observed in 1990. Financial Services inflows on the Balance of Payments accounts continue to rival tourism inflows for first place in the economy.
IBC's Registration
14. Economic Performance Summary Review The macroeconomy continued to enjoy the benefits of a strengthened USA dollar against the Euro, the Canadian dollar and the British Pound although consumer prices continued their small but sustained rise over the past four quarters. The balance of transactions with the Rest of World improved as a result of good sectoral activities in tourism and financial services. Domestic credit continues to expand in the face of slowing in the growth rate of deposits while public finances remained in excellent shape. The construction sector likewise received a boost from public investment and the expansion in domestic credit. Inflation, as measured by the Consumer Price Index (CPI) annual average change, jumped slightly from 4.53% to 4.95% as food, clothing and household supplies edged upwards. Foreign currencies including the Euro, Canadian dollar and British pound fell against the US dollar giving a mixed impact on trade and loan amortization. Compared to the first quarter 1998, the overall balance on major items of trade in goods and services jumped 21.5% to $35.5m based on preliminary estimates. These substantial and seasonal jumps were no doubt associated with the strong tourist season and the sterling performance of the international financial services sub-sector. The index of loans outstanding moved from 276 to 297 as the volume of credit grew 7.6% to $443.9m in the review quarter compared to the fourth quarter 1998. However, unlike total credit outstanding, total deposits fell 0.7% to $877.2m as some commercial bank CD’s were moved to other banks. The total number of trade licences estimated to be operating were 2,966, 3,201 and 3,316 for the first and fourth quarters of 1998 and the review quarter, respectively. The increase during the review period over the previous quarter was 4.6%. Compared to the first quarter of 1997 and 1998, there is obviously a noticeable increase in company formation as evidenced by indices of 109 and 81, respectively. The index of local companies formed during the review period stands at 228. Tourism returned to its strong performances with tourist nights rising 9.8% and 10.5% compared with the initial quarters of 1997 and 1998, respectively. On the other hand, the formation and maintenance of International Business Companies continued to bring substantial inflows to the external account as the index of companies registered jumped to 828 from 792. Current expenditure fell 5.9% and rose 29.4% during the review period compared with the first and fourth quarters of 1998. Capital expenditure amounted to $4.6m compared to $5.8m and $6.5m seen in the first and the fourth quarters of the previous year. 15. Economic Outlook for the Second Quarter, 1999 Coming during the General Elections period, the second quarter will witness acceleration in economic activity during the peak tourists season, producing a powerful positive impact on the economy. Construction spending is expected to increase noticeably as bank credit for home construction expands. Central Government finances are expected to have another good quarter as tourism and financial services revenue flows are expected to reach record levels. This good performance of the government sector will no doubt influence aggregate demand in the economy. Public sector spending and the continued expansion of private sector credit are likely to go well for our economy. A very well oiled commercial sector is expected to lead the way as consumer spending is expanded. The distribution and construction sectors are expected to do well. Public Sector Investment will continue to carry the heavy construction industry. The continued good performance of financial, business and professional services will continue to drive the services sector for the entire upcoming quarter.
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