Inflation Expected to Remain Elevated at 18.5 Percent In 2023

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By: Kebba AF Touray

Mr. Ebrima N Wada, the Director of Research at the Central Bank of the Gambia, has said that inflation is expected to remain elevated at 18.5 percent in 2022 and remains largely unchanged at this level in 2023.

Director Wada was delivering a keynote address on behalf of the Governor of the Central Bank of the Gambia, Mr. Buah Saidy at the 42nd Joint Ordinary Meeting of the Economic and Monetary Affairs Committee and the operations and administration Committee of West Africa Monetary Agency (WAMA).

“Inflation is expected to remain elevated at 18.5 percent in 2022 and remains largely unchanged at this level in 2023. Fiscal performance in 2022 worsened as budget deficit rose to over 5.0 percent of GDP, reflecting the combined effects of revenue under-performance and increased expenditure,” he said on macroeconomic developments in the ECOWAS Region.

He added that growth is expected to be sustained above 4.0 percent in 2022 and 2023, despite the slowdown in the global economy.

He reported that the Gambian economic is projected to grow by 4.5 percent in 2022 and 6.0 percent in 2023, down from initial projections of 5.6 percent and 6.2 percent , respectively, and growth is projected to stabilise around 5.0 percent in the medium term.

“Given the surging food and energy prices, inflation is expected to remain high in 2022 and 2023 but reverting to single digit in the medium term. Although, the rise in the cost of living continues to hold back household consumption, public and private constriction, agricultural output and tourism supported growth in 2022,” he said.

Director Wada further said that latest indications are that the global economy grew by 3.2 percent in 2022 from 6.0 percent in 2021, reflecting the weakest growth rate since 2001, only higher than the rate recorded during the global financial crises of 2007/2008 and the peak of the COVID-19 Pandemic.

Whilst stating that real GDP he said is projected to further slowdown to 2.7percent in 2023, he said that the slowdown in economic growth is place within an atmosphere of rising inflationary pressures as global inflation rose to 8.8 percent in 2022.

He echoed that the balance of payment s position continues to be under pressure as the current account deficit is forecast to widen further in 2022.

He however said that the deficit in the goods account is expected to narrow due to the slowdown in the growth of imports, while explaining that private remittance inflows are expected to normalise after peaking in 2021 and gross international reserves remains in excess of 4 months of import cover and that is expected to be sustained in 2023.

“However, pressure on the balance of payments and foreign exchange may persist if the spillovers from the war in Ukraine intensify, commodity prices remain elevated and an abrupt global slowdown or recession occurs”, he said.

The Central Bank of the Gambia, he said, will further tighten the monetary policy stance as inflationary pressures are expected to persist before moderating gradually towards the end of 2023, thus the policy rate will be increased and brought rapidly into positive territory in real terms.

Meanwhile, in a bid to narrow the budget deficit and create fiscal space, the authorities will implement several measures to boost domestic revenue collection, such as the collection of several other tax and non-tax revenue, accelerate digitalisation and expand the tax ledgers cleansing to other categories of taxpayers among other measures.