Abstracting from the incorporation of an
offshore loan portfolio involving $147.3 million into the domestic system,
commercial bank credit to the non-financial private sector contracted by
approximately 0.6% ($16.3 million) during the year.
This contrasts with an increase of 0.3% ($8.4 million)
over the comparable period a year ago.
A modest decline in the overall fiscal deficit to
around 4.6% of nominal GDP is expected for 2003. However, the deficit could
rise as high as 6.2% of GDP in the event of a war.
The anticipated rise in private sector activity
should help to increase Government revenue from corporate taxes and reduce
the need for counter-cyclical spending by Government, provided that there
is no war.
However, the fiscal reforms outlined in the 2002
budget session will mean lower personal tax collections.
The deficit is likely to be financed primarily
from the domestic banking system.
In the case of a return to growth, a modest
pick-up in credit and a slowdown in the growth of domestic deposits are
expected, which would lead to a reduction in excess liquidity over the
However, under the war scenario private sector
credit could decline sharply, thus offsetting the effect of the slowdown in
domestic deposit growth. There would therefore be very little impact on