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Indicators> Economic Indicators> Quarterly Bulletin Second Quarter 1999 |
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Quarterly Bulletin Second Quarter 1999
Volume (5) No. (2) July, 1999 Main
Economic Indicators At the end of the first half of 1999, (June 999) the Consumer Price Index (CPI) stood at a 119.3 index level, down 0.5 from the 119.8 index level recorded in the previous month (May). The subgroup mainly responsible for the decline in the index was the Food, Beverage & Tobacco category which declined by 1.70 percent due to lower prices for chicken parts, eggs, milks, fruits and vegetables, juices, cereals and coffee. In a quarterly comparison, all the subgroups showed a significant increase, with the exception of Food, Beverage & Tobacco, and Transportation, which declined by 0.20, and 1.45 percent respectively.
Annual Inflation Rates
The second quarter 1999 witnessed a reverse in the trend of a strengthening US dollar against key foreign currencies in which the British Virgin Islands trade. The US dollar fell against the Euro, the Canadian dollars and the British Pound providing increase in the value of their tourist dollar in our markets. The US dollar held firm against the Japanese Yen. The weakness of the US dollar, on the other hand will have cost us additional dollars to repay public sector loans denominated in the above currencies and to purchase goods from those countries whose currencies gained on the dollar. The EC dollar remains fixed against the US dollar.
Currencies vs United States Dollar
3. Transactions with the Rest of the World Fueled by the growth in export services by the tourist sector and financial services, the overall balance on the major categories of international trade grew 29.1%, 4.8% and 6.6% compared to the second quarter 1997, the second quarter 1998 and the first quarter 1999. In comparison with the like quarter 1997 and 1998 the imports of goods and services rose 19.0% and 9.8% whereas the exports of goods and services expanded 21.2% and 8.3%, respectively. The expansion of export was by an increase of 21.3% and 8.2% mainly as a result of good growth in tourist arrivals and spending compared to the corresponding quarters of 1997 and 1998. Similarly, imports were led by expansions in financial services and residents travelling abroad as services jumped 26.1% and 11.1%, respectively compared to the corresponding quarters of 1997 and 1998.
r= revised Current Account: Major Components ($’000)
After a single quarter of change for deposits, both loans and deposits returned to positive growth indicating the expansion of credit, savings and deposits by business and households. Total deposits recorded growth rates of 30.7% and 14.5% at the end of the review quarter compared to the second quarter 1998 and first quarter 1999, respectively. Demand deposits, saving deposits and certificates of deposits grew 14.5%, 5.3% and 5.7% over the first quarter 1999, respectively. Compared to a year ago, demand deposits, savings deposits and certificates of deposits grew 30.7%, 20.4% and 7.4% respectively. Credit outstanding expanded to $498.8m or 5.3% compared to the previous quarter raising the index to 343 from 297. Figures also indicate a growth rate of 8.2% compared to the second quarter 1998.
Indices of Deposits and Loans
5. General Business Indicators: Trade Licenses Paid The number of trade licences issued and renewed each quarter can be used as a proxy to measure in some way the level of business activities and to give an idea of the expectations people have for doing business. Compared to the second quarter of 1998 and the first quarter of 1999, there has been a sharp decline in the number of trade licences approved. The number of trade licences renewed dropped sharply as well, but this is expected as renewals are seasonal and heavily concentrated in the first quarter. The number of licences operating rose 2.3% to 3,392 and similarly the index of trade licences jumped to 181 compared to the 162 and 171 observed at the end of the second quarter 1998 and the first quarter of 1999, respectively.
Quarterly Issue of Trade Licences
6. General Business Indicators: Companies Incorporated The formation of local companies (companies registered to do business in the British Virgin Islands) gives an indication of the changing landscape towards a corporate preference for conducting business. The index of 183 signals that company formation per quarter has almost doubled in the last six years. The level of company formation continues to parallel the expansion in domestic economic activities. During the second quarter 1998, 53 companies were incorporated compared to 36 and 45 incorporated during the second quarters of 1997 and 1998, respectively.
Company Registration
Boosted by the peak period of a very good tourist season and the solid performance of financial services, Central Government revenue grew 11.3% to $52.0m and 15.3% compared with the second quarter of 1998 and 1997, respectively. On the other hand, total expenditure, being 88.8% current and 11.2% capital, grew 57.7% and 16.6% compared to the second quarters of 1997 and 1998, respectively. It is also noteworthy that capital expenditure fell 11.1% compared to the first quarter of 1999 but was $4.11m compared to the $2.6m in the second quarter of 1998.
Central Government Spending
8. Energy: Electricity and Water The demand for electricity accelerated as both the amounts generated and consumed rose sharply in comparison with the second quarter 1998 and the first quarter 1999. Electricity generated rose to 26,976 kwh amounting to increases of 16.1% and 11.0% over the second quarter of 1998 and the first quarter of 1999, respectively. Electricity consumed rose 17.7% and 11.4% over the second quarter 1998 and the first quarter 1999, respectively. The demand for the publicly supplied water rose moderately over the second quarter 1998 and the first quarter 1999. Water produced rose 42% and 2.8% in the review period compared with the second quarter 1998 and the first quarter 1999, respectively.
Electricity and Water Activity
Land transport vehicles registered is an indicator of business activities and also activities of households and government. Together with gasoline and other fuels consumed, the number of vehicles operating gives a good idea of the direction and general trend of the transport sector. Figures recently released by the Licencing Department indicate an overall growth of 22.6%, 6.8% and 4.0% compared to registrations during the third quarter 98, the fourth quarter 98 and the first quarter 99, respectively. The 2,420 vehicles registered during the second quarter 1998 represents in combination a fall of 23.3%, a growth of 7.2% and an increase of 5.6% in the number transport, private and other vehicles registered, respectively.
Motor Vehicles by Type
Tourism, financial services and the INTERNET are leading the way in the consumption of telecommunication services as we plunge deeper into the Information Age and move into the next millennium. The use of telecommunications continues to increase as indicated by the indices of 186, 175 and 172 registered for local calls, international calls and international call minutes. The indices were 184, 169 and 167 for the same respective categories at the end of the first quarter 1999.
Index of Telephone Calls
Reflecting the increased activities in the construction sector and expansion in credit thereto, the package of selected construction materials rose 6.5% over the first quarter 1998, according to revised figures. The increase in the import value of the package was lead by sharp increases in pvc piping, rough lumber and nails. On the other hand there were noticeable declines in the imports of steel, paints and cement. The fall in steel is linked to imports for steel structures whereas in cement, it is associated with the slower activities in paving roads. Overall the increase seems to be connected with home building rather than the construction of infrastructure. (US$ dollars)
r=revised Imports of Construction Materials
The tourism sector was characterized by noticable 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 incorporation and subsequent annual registration of international business companies (IBC’s) together with tourists activities have become the major generators of domestic activities in the British Virgin Islands. The two important indices to monitor are the index of companies being incorporated each quarter and index of companies registered or being carried on the books. These indices capture the rate of growth and the volume of companies being maintained. Figures available indicate company formation at a rate almost three times greater than 1991 and a volume of companies on the books almost nine times higher than 1991.
IBC’s Registration
14. Economic Performance Summary Review The second quarter was characterized by strong performances in the export and domestic sectors resulting in positive internal and external balances in the macroeconomy. Strong sectoral performances in tourism and financial services in combination with expanded construction activities bolstered the domestic economy. Expansion in deposits and credit together with favourable interest rates were responsible for increased capital formation. Economic activity was also punctuated by increased demand for utilities such as water, electricity, telecommunications and transport services. Favourable inflation rates in trading partner countries, the net impact of strength of the US dollar and the expanded overall balance on transactions with the Rest of the World were the key components propelling the good performance of the macroeconomy. The overall balance on transactions with the Rest of the World grew 6.6% as a result of a 8.2% expansion in tourist arrivals and 32 index points growth in the registration of IBC’s. The improvement of $2.2m in the net balance of transactions came as a result of a 19.7% or $15.5m increase in the imports of goods and services. 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. In addition to the good tourism performance, financial service activities were up noticeably and net revenue inflows jumped approximately 7.0% over the previous quarter. Benefiting from strong economic activities in tourism and financial services, Central Government revenue rose to $52.0m or 11.3% while total expenditure expanded 16.6% to $36.8m generating a sizeable surplus after financing capital expenditure of $4.1m. Contributing to the increase in capital formation were the overall drop of 0.5% in the Consumer Price Index (CPI) and the 5.3% expansion in credit mainly for home construction. The expanded demand for utility services were led by a 16.1% jump in demand for electricity, a moderate rise of 3.5% in water consumed and a noticeable increase in the demand for telecommunication services related to the INTERNET. The upsurge in economic activity was further confirmed with the 2.3% growth in business licences operating and a moderate increase in the number of companies operating. In conclusion, the second quarter was outstanding in terms of increased economic output, falling consumer prices, expanding credit, growing savings and increased gross capital formation. Sectoral activities in tourism and financial services continue to lead the way in economic activities. 15. Economic Outlook for the Third Quarter, 1999 The third quarter is the peak of the hurricane season and it is the valley of economic activities because it falls in the tourist slow season. Hurricanes occurring with serious damage to the tourism plant can prove to be disastrous for the tourist season as repairs and the confidence of travel organizations in overseas market are not so easy to accomplish in such a short period. However, because of the anticipation of an increased volume of tourist activities, predictions are that third quarter economic activities will be just slightly better than the same period last year. It is expected that bank credit for housing construction and public sector investment will continue to boost construction and consequently domestic investment in aggregate. Relative to the second quarter, there will be a noticeable fall in tourist activities but financial services inflow will to somewhat fill the gap. Consumer spending is expected to slip as most tourism sector workers, representing 30% of the workforce, will face reduced income until the fourth quarter. The third quarter 1999 is expected to be just a little better than the third quarter 1998 if serious damage does not result from the passage of hurricanes.
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