Central Bank of Seychelles Monetary Policy Decision Q4 2018 - PowerPoint PPT Presentation

Central Bank of Seychelles Monetary Policy Decision Q4 2018 October 04, 2018

Monetary Policy Stance for the Fourth quarter of 2018

Decision • Maintain Tight monetary policy stance for the fourth quarter of 2018 • Unchanged interest rate corridor SCF at 8% (ceiling) • SDF at 2% (floor) • • MRR remains unchanged at 13% The reserve money target (average): R3,776 million which implies a quarterly • growth rate of 3.6%. The CBS remains vigilant and continues to monitor inflationary developments during the quarter

Moderation in external inflationary pressures

Modest increase in energy prices being anticipated whilst food prices remained steady EIA forecast as at August 2018 EIA forecast as at June 2018 Source: Food and Agriculture Organisation Source: EIA Short Term Energy Outlook

SCR 12.50 13.50 14.50 15.50 16.50 17.50 18.50 19.50 20.50 Depreciating trend against the USD with 03-Jan-18 18-Jan-18 02-Feb-18 17-Feb-18 EUR and GBP weakening 04-Mar-18 19-Mar-18 03-Apr-18 18-Apr-18 03-May-18 SCR/USD 18-May-18 02-Jun-18 17-Jun-18 SCR/EUR 02-Jul-18 17-Jul-18 01-Aug-18 16-Aug-18 SCR/GBP 31-Aug-18 15-Sep-18

Mixed indicators from the real sector

Fall in tourist arrivals and tourism earnings Drop in arrivals in Q3 YOY but even greater fall in yield * Last outcome August 2018 / September figure estimated

Mixed performance from fisheries sector Slight fall in canned tuna production growth in Q2 but rise in export volume and value * Last outcome 2018 Q2

YTD 2017/ YTD 2018/ 2018 Q2/ 2018 Q1 % Chg %Chg -1.0 Tonnes Fish catch 1.1 -15.7 34.7 Tonnes Canned tuna Mixed production indicators in Q2 2018 20.8 Millions Egg Production 9.9 26.8 Litres Beer 3.5 41.0 57.1 Litres Stout -33.2 -1.2 Litres Spirits 32.3 11.8 -19.5 12.7 Litres Soft drinks Litres Mineral Water 5.3 64.2 Nos Tobacco (Cigarettes) -17.9 Nos Blocks 9.1 Paint & Paint -3.7 Litres 2.9 products 126.6 22.4 Kgs Animal Feed -2.1 -2.1 kWh Electricity (kWh) kLts Water Consumption 7.6 1.1 -18.9 kLts Water Production 0.1 Telecom Services Nos 4.3 2.3 (Mobile Accounts) -0.3 -2.7 Hours International Call Hours Local Call 5.1 0.9 Telephone Exchange -3.7 Nos 6.2 Lines 133.1 19.8 49.4 -10.2 Nos Internet Connection Cable TV Nos 3.7 Connections 27.2 GB Data Traffic

Positive GDP growth expected in Q2 2018 YOY growth of 4.6% in Q1 2018 Near term forecast in Q2 2018 * Last outcome Q1 2018 / Q2 2018 is an estimate

Economic outlook for 2018 indicates positive GDP growth • Tourism • Increased air connectivity • Despite slowdown in performance, YTD arrivals growth and industry yield remains positive • Tuna production • Mixed indicators: Higher production and higher export volume helps mitigate the loss in export value • Infrastructure projects expected to have a positive effect on growth • E.g. Road developments, PUC projects, Housing Projects • Credit schemes: • Government targeting to increase credit to SMEs • Demand for private sector credit remains high

Slowdown in money supply growth and rise in interest rates

Slowdown in money supply and total credit with double digit growth in private sector credit 22 Total Credit YoY % Private credit YoY % Money supply YoY (%) 20 18 16 Per cent (%) 14 12 10 8 6 4 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2017 2018

Individuals & Households account for biggest share of private sector credit Art & Entertainment Building and Agriculture and Education 0.8% Construction Horticulture 0.4% 7.9% 1.7% Fishing Health 0.9% Mortgages 2.5% 13.5% Manufacturing 3.3% Professional, Scientific & Technical Services 0.4% Individuals & Households Real Estate 22.9% 10.4% Others Telecommunications, 2.7% Computer & Information Community, 1.5% Social & Personal Transport Trade Tourism 0.9% 4.6% 10.2% 15.4% * Last outcome August 2018

Evolution of key interest rates 8.0 Avg lending rate 91 day T-bill 7.0 12.8 Avg savings rate (sec) Per cent (%) 7-day DAA (sec) 6.0 Per cent (%) 12.5 5.0 4.0 12.2 3.0 11.9 2.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2017 2018

Modest inflationary pressures domestically

Moderation in inflationary pressures 6.0 5.0 CPI Jul Aug Month on Month (%) 0.41 -0.20 4.0 Per cent (%) Year on Year (%) 3.13 2.78 3.0 12-month average (%) 3.76 3.66 2.0 1.0 0.0 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2017 2018 Annualised Year-on-year

Potential sources of inflationary pressures • Impact of revision in domestic utility tariffs and tariff rebalancing programme • Second round effects of depreciating exchange rate • Fiscal policies: • Increase in Minimum wage in January 2019 + 13 th month salary • Review of public sector salary grid • Progressive income tax • Property Tax • “Glass” tax • Populist measures (pressure to meet public expectations) • Elections in 2020 • Ongoing infrastructure Projects may pick up in pace in Q4 and into 2019 • Housing and PUC Projects • Modest increase in oil prices

Maintain a tight monetary policy stance for Q4 2018 in light of rising inflationary pressures and uncertainty that is expected in the short to medium term CBS ready to adjust the policy stance to safeguard price stability