Economic Review - June 2007

Real economic activity expanded by an estimated 3.3% for the first three months of 2007, compared to 4.2% recorded for the corresponding period of 2006. This fifth consecutive first quarter increase was led mostly by strong performances in the non-traded sectors. However, the external current account deficit remained moderate over the review period as a result of slower import growth, and slightly higher travel credits. The surplus from the capital account was sufficient to offset the current account deficit and the net international reserves (NIR) of the monetary authorities rose during the same period. Given the sluggish imports, commercial bank credit to the non-financial private sector also grew, though at a slower rate than in the first three months of 2006. The growth of domestic deposits outpaced that of credit, but liquidity conditions in the banking system remained relatively tight. After reporting a surplus in the first quarter of 2006, for the comparable period of 2007, the central government registered a moderate fiscal deficit which was financed mainly by domestic sources.