GDP set to grow by 4%



Bereng Mpaki

LESOTHO’S Real Gross Domestic Product (GDP) is expected to accelerate to 4.1 percent in 2018 on the back of strong to moderate performances in the services and mining sub-sectors, the Central Bank (CBL) said on Tuesday.

Lesotho’s economic growth was estimated at 2 percent for 2016 but further growth is anticipated on the back of positive growth in the two sectors.

“Domestic economic activity is expected to recover over the medium-term,” CBL’s acting Governor, Masilo Makhetha said in a statement.

“Real GDP is expected to accelerate to 4.1 per cent in 2018.

“The recovery is expected to be supported by moderate growth in the services sector and a strong rebound in primary sector, particularly in the mining sub-sector.”

Dr Makhetha also said that inflation had slowed down due to the moderation in prices of food and non-alcoholic beverages.

“The year-on-year consumer inflation rate decelerated from 6.0 per cent in September to 5.3 per cent in December 2016. This was largely due to the moderation in prices of food and non-alcoholic beverages both in the region and domestically.

“Inflationary pressures are subsiding, mainly due to easing food prices and the strengthening Loti. However, the economy remains highly exposed to internal and external shocks. The Committee will continue to monitor the global, regional and domestic economic developments closely and act accordingly.”

Dr Makhetha further indicated the global economic activity recovered marginally in the fourth quarter of 2016, even though it remained weak.

“Having considered the above developments, the MPC decided to reduce the Net International Reserves target floor from US$680.00 million to US$635.00 million, and to keep the CBL Rate unchanged at 7.00 per cent,” he added.

He said the broad measure of money supply (M2) contracted by 4.2 per cent in December from 5.4 per cent in September due to a decrease in both CBL’s and commercial banks’ Net Foreign Assets (NFA).

This was partly due to commercial banks’ inflows from abroad on the back of the December holidays.

“Revised data indicated that the current account deficit widened to 7.7 per cent of GDP in the third quarter of 2016, compared with a revised deficit of 7.4 per cent in the previous quarter. This was driven by movements in both primary and secondary income accounts.

“Gross official reserves are estimated to have declined by 1.9 per cent in the fourth quarter. Measured in months of import cover, official reserves are estimated at 5.5 months in the quarter ending in December compared to 5.6 months recorded in the previous quarter,” he stated.

He said at the end of December 2016, the government budget balance was estimated to have deteriorated to a deficit of 7.0 per cent of GDP from that of 6.3 per cent in September, largely due to poor performance of government revenue during the period.

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