Home Business Mixed economic performance for Lesotho

Mixed economic performance for Lesotho

by Lesotho Times
0 comment 221 views


Bereng Mpaki

Lesotho has recorded a mixed economic performance in the second quarter of 2017, in a development that saw a contraction in the manufacturing and sub-sector of construction, the Central Bank of Lesotho Governor Dr Retšelisitsoe Matlanyane said this week.

Positive performance in the mining sub-sector and tertiary sector improved economic outcomes of the primary sector, a situation that can be linked to improved job prospects.

A slow manufacturing sector can have a negative impact on other sectors linked to manufactured products while a damper in the construction sub sector, an investment-led component, affects employment creation.

Speaking following the Bank’s Monetary Policy Committee (MPC) meeting on Tuesday this week, the governor said the Committee had to review its policy stance to be in-line with these developments and those from around the globe.

Following the meeting, the CBL increased the Net International Reserves (NIR) target floor from US$635 million to US$700 million to maintain the CBL rate at 6.75 percent per annum.

“There are mixed signals with regard to the performance of the domestic economy. The positive performance emanated from the primary and tertiary sectors, while the secondary sector registered negative growth” Dr Matlanyane said.

She further explained that the downside risks remained on the level of reserves and as such the Committee will continue monitoring developments in areas that have a direct bearing on the NIR level.

Developments that were considered from around the globe included the positive performances in advanced markets such as the United States and the Euro Zone economies, while the Chinese economy also showed a strong growth of 6.9 percent in the second quarter of 2017.

However, economic activity in Japan remained subdued with growth in in the United Kingdom also slowing down due to anxiety over Brexit prospects.

Dr Matlanyane further indicated that despite the latest developments, the economy was still expected to recover over the period from 2017-2019, boosted by positive performances of the primary and tertiary sectors. On the other hand, the commencement of advanced infrastructure construction of the second phase of the Lesotho Highlands Water Project is expected to strengthen the next economic growth cycle.

“The year on year consumer inflation rate registered 5.4 percent both in July and August compared to the 5.0 percent recorded in June 2017. The acceleration in overall inflation is amid an increase in ‘food and non-alcoholic beverages’ category, despite falling food prices across the Southern region,” she added.

Dr Matlanyane also indicated that the country’s external sector position had improved during the period in question.
“The current account deficit narrowed from 8.6 percent of the per capita Gross Domestic Product (GDP) registered in March to 8.2 percent of the GDP in June. This was due to a rise in returns on portfolio investments abroad, coupled with increased remittances from the Southern Africa Customs Union (SACU).”

The official reserves coverage fell to 4.4 months of import cover at the end of June from 4.9 months in March, as result of increased import bill.

“Government budgetary operations registered a deficit equivalent to a 1.4 percent of GDP during the quarter ending in June 2017 compared to deficit of 8.4 percent in the quarter ending in March 2017,” she said.

As a result, she explained, the 2017/18 National Budget proposed a lower fiscal deficit equivalent to 7.0 percent of GDP for the current fiscal year, compared to the revised estimated deficit of 10.6 percent realized in 2016/17. This will help to alleviate burden on the economy.

You may also like

Leave a Comment

The reCAPTCHA verification period has expired. Please reload the page.