Monetary Policy Committee Price ce Develop lopments ments and - PowerPoint PPT Presentation

Monetary Policy Committee Price ce Develop lopments ments and Outlook; ok; Monet etary ary and Balanc ance e of P Paym yment ents Develo elopment pments 30 September 2013 0

FOOD PRICES (FAO database) On account of improved supply, FFPI reached 201.8 in Aug-3. Since reaching an intra-year peak of 215.5 in Apr-13, it has continuously declined. It is trending below the 2012 level; Even after adjusting the weights to reflect the imports structure /food component of the CPI ( putting the weight of sugar to zero among others ), the FFPI- adjusted also pointed to a continuous decline since Ap-13 due to significant weight of cereals 1

FOOD PRICES (FAO database) Cereals and oils & fats continued to fall while dairy, meat and sugar rose slightly 2

Oil Prices-monthly averages 130.0 125.0 120.0 ICE BRENT 115.0 110.4 US$ per barrel 110.0 103.3 105.0 106.5 NYMEX 100.0 94.8 95.0 90.0 85.0 80.0 Jun/11 Jul/11 Aug/11 Sep/11 Oct/11 Nov/11 Dec/11 Jan/12 Feb/12 Mar/12 Apr/12 May/12 Jun/12 Jul/12 Aug/12 Sep/12 Oct/12 Nov/12 Dec/12 Jan/13 Feb/13 Mar/13 Apr/13 May/13 Jun/13 Jul/13 Aug/13 3

Other Commodity Prices 4

World - Inflation 5

DOMESTIC DEVELOPMENTS 6

May to August: What happened? 5.0 4.4 4.5 4.0 4.1 3.8 3.6 3.7 3.5 3.6 3.6 3.6 3.1 3.0 2.9 2.5 2.0 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 7

Cumulative Monthly Changes May to August 2006 2007 2008 2009 2010 2011 2012 2013 DIVISION 01 - FOOD & NON- ALCOHOLIC … 6.7 4.1 6.4 1.4 1.1 1.1 1.6 -1.2 20.8 9.0 1.7 0.4 -0.2 0.4 0.0 -0.2 DIVISION 02 - ALCOHOLIC BEV. & TOBACCO 2.3 2.0 0.8 4.4 2.5 2.4 1.8 0.9 DIVISION 03 - CLOTHING & FOOTWEAR 4.4 0.9 -0.3 0.2 -0.1 0.5 0.0 -0.6 DIVISION 04 - HOUSING, WATER, ELECTRICITY, …. DIVISION 05 - FURNISHINGS, HOUSEHOLD EQUIP..& … 3.6 2.4 2.7 1.5 2.1 1.1 1.6 -0.1 3.1 5.6 3.9 1.0 2.7 0.1 2.9 0.3 DIVISION 06 - HEALTH 8.6 6.0 12.7 1.8 3.0 0.4 -0.4 0.4 DIVISION 07 - TRANSPORT -3.9 0.0 -3.2 0.6 0.0 -0.1 0.0 0.1 DIVISION 08 - COMMUNICATION 3.2 -0.9 -0.3 0.6 0.5 1.0 -0.4 3.4 DIVISION 09 - RECREATION & CULTURE 0.0 0.0 0.8 0.0 0.0 0.0 0.6 0.2 DIVISION 10 - EDUCATION 14.3 4.7 5.2 1.0 2.6 0.6 0.6 0.3 DIVISION 11 - RESTAURANTS & HOTELS 3.3 2.9 2.8 1.6 2.3 1.7 0.9 -0.3 DIVISION 12 - MISC. GOODS & SERVICES 8

Measures of Consumer Inflation Aug-11 Aug-12 Dec-12 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 12-Month 5.8 4.6 3.9 3.6 3.6 3.6 3.6 3.6 3.5 Average Year-on-Year Inflation 6.5 3.7 3.2 3.6 3.8 3.7 3.6 3.6 3.1 CORE1 5.7 3.0 3.2 2.7 2.6 2.6 2.5 2.7 2.6 CORE2 4.8 2.7 3.0 2.7 2.6 2.5 2.4 2.5 2.3 Food 6.1 2.0 1.1 3.1 4.2 3.8 3.7 3.1 1.6 Goods 6.7 4.0 2.9 4.3 4.5 4.3 4.2 4.0 3.3 Services 5.8 3.4 3.9 2.1 2.6 2.6 2.2 2.6 2.7 9

Weighted Contribution to CPI Inflation 10

Year-on-Year and CORE2 11

Mean Expectations – Time Horizons 12

Inflation Forecasts: Expert Judgement Year-on-Year Headline Dec-13 (Tax AB&T, Adm. P) 4.5 - 4.9 3.7 - 3.8 Dec-13 (No Tax & Adm. P) 3.7 - 4.0 3.5 - 3.6 Jun-14 (Tax AB&T, Adm. P) 4.9 - 5.5 4.2 - 4.5 Jun-14 (No Tax & Adm. P) 4.1 - 4.6 3.6 - 3.9 13

Inflation Convergence in SADC African Monetary Southern Africa Common Market for Cooperation Development Eastern and Southern Programme Community Africa Stage III: 2009-2012 2009-2012 Period: 2005-2010 5% inflation Rate by Annual Inflation not Inflation Rate < 5% 2012 exceeding 5% Stage IV: 2013 - 2015 2013 - 2018 Inflation Rate < 3% Inflation Rate < 3% 14

MONETARY DEVELOPMENTS 15

Annual Growth Rate of Broad Money Liabilities (BML) and Depository Corporations’ (DCs) Loans to Private Sector (per cent) 16.0 14.0 DCs’ loans to private 12.8 sector 11.7 12.0 10.2 10.0 8.0 7.9 7.3 BML 6.0 4.0 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 16

6.00 6.20 6.40 6.60 6.80 7.00 7.20 7.40 7.60 Jan-11 Feb-11 Money Multiplier (BML/MB) Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 17 Jun-13 17 Jul-13

Real Interest Rate Real interest rates= nominal savings rate adjusted for inflation rate 18

BALANCE OF PAYMENTS DEVELOPMENTS 19

Current A/c and its components Q2-2013 Rs Million Q2-2011 Q1-2012 Q2-2012 Q3-2012 Q4-2012 Q1-2013 -10,952 -4,223 -8,639 -10,984 -11,703 -6,877 -7,445 Current Account -15,401 -17,194 -18,095 -17,157 -20,652 -15,217 -14,937 Goods 17,709 18,402 20,434 19,751 21,772 20,361 21,746 Exports -33,110 -35,596 -38,529 -36,908 -42,424 -35,578 -36,683 Imports 4,221 9,632 7,452 4,483 7,419 6,133 6,703 Services -1,594 -1,239 -1,226 -1,910 -1,942 -1,517 -1,839 Transportation, net 11,193 5,427 9,614 8,852 Travel, net 6,588 7,148 6,910 9,355 13,768 9,780 8,406 12,424 12,064 9,991 credit -2,767 -2,575 -2,632 -2,979 -2,810 -3,212 -3,081 debit -773 -322 1,530 966 -253 -1,202 1,632 Other services, net -839 1,762 1,456 1,646 -561 2,115 182 Income 1,067 1,577 548 44 2,091 93 607 Current transfers 20 20

Savings and GDFCF to GDP Ratio 35.0 30.0 28.3 26.4 Ratio GDFCF to GDP mp 25.0 21.5 22.5 20.0 21.2 Ratio GNS to GDP mp 15.0 15.1 13.9 10.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 21

Financing of the Current Account Rs Million Q2-2011 Q1-2012 Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-2013 -16 -40 -73 -45 -83 -8 -48 Capital account, net Financial account, 8,616 5,597 10,173 8,809 13,578 8,240 5,070 net Direct investment, 33,202 18,601 -56,470 -543 21,095 -26,478 -26,481 net Portfolio investment, 65,062 79,774 80,317 73,378 71,772 80,245 82,837 net -87,534 -94,392 -10,705 -62,921 -75,708 -40,523 -40,640 Other investment, net -2,114 1,614 -2,970 -1,105 -3,580 -5,004 -10,646 Reserve Assets Net Errors and 2,352 -1,334 -1,460 2,220 -1,792 -1,356 2,423 Omissions 22 22

Gross Official International Reserves 120.0 Rs 105.0 bn, 5.6 Rs 100.7 mths, end bn, 5.3 m 100.0 80.0 60.0 40.0 20.0 0.0 Q1 10 Q3 10 Q1 11 Q3 11 Q1-12 Q3-12 Q1-13 Aug-13 23 23

Thank you 24 24