Maldives: Quarterly Economic Bulletin - December 2016

Transcription

2. This bulletin is compiled by the Monetary Policy and Research Division (MPRD) of the Maldives Monetary Authority (MMA). It covers developments in the domestic and international economy during the fourth quarter of 2016. The analyses are based on information provided by relevant government authorities, commercial banks operating in the country, public enterprises and other private sector sources, as at 26 January 2017. Where actual data is not readily available, estimates have been made by MPRD based on available information. The timely receipt of data is therefore crucial to the compilation of this publication and the analyses contained herein.
3. Contents Recent Economic Developments  International Economic Developments 1 Output 1 Inflation 2 Commodity Prices Domestic Economic Developments Real Economy External Trade Statistical Appendix 4 4 Public Finance Money and Banking 3 7 8 11
4. Abbreviations bpsbasis points c .i.f. cost, insurance, freight CPI consumer price index f.o.b. free on board GDP gross domestic product GIR gross international reserves HICP Harmonised Index of Consumer Prices IMF International Monetary Fund M0reserve money M2broad money MMAMaldives Monetary Authority NDA net domestic assets NFA net foreign assets NPLnon-performing loan ODF Overnight Deposit Facility PNFC public non-financial corporation UAE United Arab Emirates UK United Kingdom US United States
5. Recent Economic Developments
7. International Economic Developments reflected in the high frequency indicators such as the Economic Sentiment Indicator (ESI) which points to positive growth during the quarter. The improved euro area sentiment stemmed from a stronger growth in consumer confidence and business investment, although construction investment grew at a slightly slower pace than Output Q3-2016. According to the World Economic Outlook published by the International Monetary Fund (IMF) in January 2017, global growth is expected to pick up pace in 2017 and 2018 after subdued growth performance in the preceding quarters. The growth projections, however, masked divergent developments in different country groups. The outlook for advanced economies improved, reflecting stronger-than-expected activity in the second half of 2016 and a projected fiscal stimulus in the United States (US). In contrast, there was an unexpected slowdown in some emerging market and developing economies, primarily due to uncertainty and global spillovers attached to the unclear policy stance under the new US administration; financial tightening; and geopolitical tensions. Looking at the growth performance of key advanced economies, the US economy decelerated to an annualised growth rate of 1.9% in Q4-2016 from a growth rate of 3.5% in Q3-2016. The slowdown mainly reflects a decline in exports coupled with an increase in imports. However, this was partly offset by a robust growth in private inventory investment during the review quarter. Meanwhile, the deceleration in consumer expenditure, which is the main driver of the economy, further exacerbated the slowdown. As for the preliminary gross domestic product (GDP) data for the euro area, output grew at a steady rate and recorded an annualised growth rate of 1.8% in Q4-2016, maintaining the same pace as the previous quarter. This was also Meanwhile, the Japanese economy grew at an annualised rate of 1.0% in Q4-2016, down from 1.4% in Q3-2016. The deceleration in growth was mainly due to a fall in domestic demand towards the end of 2016. Private consumption, which accounted for approximately 57% of GDP in Q4-2016, decelerated during Q4-2016 when compared with the previous quarter. Meanwhile, growth in other key components of the GDP such as investment and net exports remained subdued during the review quarter. Accordingly, nonresidential investment recorded only a modest growth while the growth in exports was offset by the increase in imports, owing to the appreciation of the Japanese yen. Amid uncertainty following the Brexit vote, the United Kingdom (UK) economy grew steadily at an annual rate of 2.2% in Q4-2016, maintaining the same pace as the preceding quarter. Growth during the quarter was solely driven by a robust growth in the services sector – the dominant sector of the UK economy. The services sector grew by 3.0%, supported by a strong growth in consumerfocused industries such as retail sales and travel agency. Further, the construction and production industries also contributed to the growth during the quarter. Looking at emerging markets and developing economies, the Chinese economy grew steadily at an annual rate of 6.8% during Q4-2016, marginally higher than a growth rate of 6.7% recorded in the previous quarter. During the quarter, growth accelerated in the industrial sector—the highest Quarterly Economic Bulletin - December 2016 | 1
8. contributing sector of the economy accounting for acceleration in prices for gas , housing and medical around 33% of GDP. Moreover, a strong growth care during the quarter. was observed in the wholesale and retail trade sector, which offset the slower growth in primary In the euro area, the rate of inflation as measured industries such as farming and agriculture. by the percentage change in the Harmonized Index of Consumer Prices (HICP), increased The Indian expected further during the quarter and stood at 0.7%, to moderate in Q4-2016 based on advanced up from 0.3% in Q3-2016. The upward trend in indicators Accordingly, inflation largely reflected a base effect of increased Purchasing Manager’s Index (PMI) data for the energy prices. Further, growth in cost of food, two largest sectors of the economy—services housing and health care also contributed to the sector sector—indicated higher HICP. However, it is noteworthy that a slowdown in growth during Q4-2016. The inflation was well below the European Central services sector experienced a downturn in Bank’s target of 2.0%. and economic for the growth period. manufacturing is business activity during the quarter, widely due to the withdrawal of high value Indian rupee In the Japanese economy, inflation turned positive notes which resulted in a cash shortage in the after two consecutive quarters of negative growth, economy. As for the manufacturing sector, output and recorded 0.3% in Q4-2016 compared with fell during Q4-2016, underlined by both scaling -0.4% in Q3-2016. The positive growth in inflation back of input purchases and drop in employment was due to higher food prices, underlined by a due to lack of payment means in the economy. change in employment pattern in Japan. However, other components of household spending such as Inflation Global inflation remained low and stood at 2.4% in Q4-2016 in annual terms, a slight decrease from 2.6% in Q3-2016. The moderation of inflation reflected divergent economic conditions across different country groups. The steady growth in inflation in advanced economies was offset by a decrease in inflation in emerging markets and developing countries. The inflation rate in expenditure on housing and utilities recorded a decline, similar to the preceding quarter. In the UK, the rate of inflation picked up to 1.2% in Q4-2016 from 0.7% in Q3-2016. The acceleration in inflation was mainly due to higher oil prices, which was specifically reflected in higher air fares. Further, growth in food prices also contributed to the increase in inflation. advanced economies was at 1.2% in Q4-2016, Looking at emerging markets and developing recording a marginal growth of 0.6 percentage economies, the rate of inflation in China increased points over Q3-2016. As for emerging markets and to 2.2% in Q4-2016 from 1.7% in Q3-2016. The developing economies, the available preliminary increase in prices primarily reflected the growth data pointed towards a deceleration from 4.9% in in food prices. In India, inflation decelerated Q3-2016. further, from 5.3% in Q3-2016 to 2.7% in Q4-2016. Delving into the inflation trends of individual advanced economies, consumer price inflation in the US accelerated to 1.8% in Q4-2016 from 1.1% in Q3-2016, primarily on the back of higher energy prices. The growth in prices also mirrored 2 | Quarterly Economic Bulletin - December 2016 The deceleration was mainly due to the sudden withdrawal of high value notes circulating in the economy which led households to delay consumption. This was coupled with a steep decline in food prices, most notably vegetable prices.
9. Commodity Prices The IMF commodity price index increased by 13 % in annual terms during Q4-2016, reflecting a substantial increase in energy prices and a hike in metal prices. Similarly, when compared with the previous quarter, the IMF commodity price index observed an increase of 7%, pushed up by higher metal prices while the oil prices increased by 10%. Moreover, agricultural raw material prices increased moderately. The annual growth in crude oil prices observed a remarkable upturn as oil prices recorded an average of US$49.1 per barrel1 in Q4-2016 compared with US$42.2 per barrel in Q4-2015. This reflects an annual growth of 16% in Q42016. The rallying in oil prices during Q4-2016 was primarily due to the decision to cut down production by the Organization of Petroleum Exporting Countries (OPEC) towards the end of 2016. Looking at other major commodities, global metal prices as measured by the IMF metal price index, increased in annual terms by 20% in Q4-2016. This was an increase of 10% when compared with the previous quarter. The surge in metal prices stemmed from higher global demand for metal commodities. As such, the projected infrastructure spending by the US government and the continued fiscal support to the construction sector by the Chinese government led to the increase in demand. As for the developments in food prices, global food prices as measured by the IMF food price index, increased in annual terms by 9% in Q42016. The annual price increases were observed in meat and seafood prices which offset sizeable decrease in prices of cereals and sugar. Quarterly average of Brent, West Texas Intermediate and the Dubai Fateh. 1 Quarterly Economic Bulletin - December 2016 | 3
10. Domestic Economic Developments Real Economy According to the latest quarterly GDP data released by the National Bureau of Statistics , the Maldivian economy continued to expand and recorded a strong growth during Q2-20162. The annual real GDP growth is estimated to have accelerated by 6.8% in Q2-2016 compared Figure 1: Quarterly Inbound Tourist Arrivals, 2013–2016 (thousands, percentage change) with 3.9% in the preceding quarter. The growth 400 in GDP was almost entirely driven by increased 15 250 was observed to be slightly weakened. Domestic 10 200 demand mainly stemmed from the continued 150 5 100 robust growth in the construction sector, which 0 50 grew by 12.8% during the quarter, on annual 0 terms. However, growth in the tourism sector, weakened further and recorded a negative growth 20 300 domestic demand, although the tourism sector which accounted for 21% of GDP in Q2-2016, 25 350 2013 2014 2015 Arrivals (left axis) 2016 -5 Annual growth (right axis) Source: Ministry of Tourism of 1.0% in annual terms, the seventh consecutive quarter of negative growth. Tourism The tourism sector gained traction towards the end of 2016 after a lackluster performance during the first half of the year. During Q4-2016, the sector’s growth momentum remained strong when compared with the same quarter a year Figure 2: Quarterly Bednight Growth and Average Stay, 2013–2016 (percentage change, days) 14 6.8 12 6.6 10 6.4 8 6.2 ago, with major indicators posting a positive 6 4 6.0 growth. The number of tourist arrivals increased 2 5.8 by 8% in annual terms and totalled 341,591 in Q42016 (Figure 1), up from a 5% annual growth rate recorded in Q3-2016. The growth in arrivals was mainly driven by an upswing in the European source markets, despite marginal growth rates in major European markets. Further, the continued increase in arrivals from the Asia and Pacific region also contributed to the growth, albeit a GDP data was only available up to Q2-2016 at the time of compilation of report. 2 4 | Quarterly Economic Bulletin - December 2016 0 5.6 -2 5.4 -4 5.2 -6 -8 2013 2014 bednight growth (left axis) Source: Ministry of Tourism 2015 2016 Average stay (right axis) 5.0
11. slight decline in the number of arrivals from recorded a 3 % decline compared with the same China. period a year ago. Looking at other key indicators of the tourism Fisheries industry, tourist bednights increased by 6% in annual terms, reflecting the growth in arrivals. The tourist bednights, however, grew at a somewhat slower pace than the arrivals growth as the average duration of stay dropped slightly during the period (Figure 2). The average duration of stay stood at 5.4 days in Q4-2016, down from 5.5 days recorded in Q4-2015. As for the supply side, average operational bed capacity of the industry increased by 5% in annual terms and totalled 29,407 in Q4-2016, contributed by the opening of 5 new resorts during the period. Despite the increase in the operational bed capacity, the average occupancy rate of the industry increased marginally to 68% when compared with 67% recorded in the corresponding quarter of 2015. As for developments in major tourist markets, Europe, which accounted for 49% of the total arrivals during the period, registered a marked growth of 9% when compared with Q4-2015. Reflecting the economic stabilisation in the region, a notable growth was observed from Spain, the UK, Italy and Russia which grew by 39%, 6%, 8% and 10%, respectively, in annual terms. However, Germany which represented around 19% of the total tourists from the European region in Q4-2016 grew marginally, while the number of arrivals from France—another significant European market—remained unchanged compared with the corresponding quarter of 2015. As for the Asia and Pacific region, tourist arrivals from this region grew by 7% in annual terms and accounted for 43% of the total arrivals in Q4-2016. The growth in the region was contributed by a considerable increase in arrivals from India and Malaysia. However, arrivals from China—the leading Looking at the developments in other major production sectors of the economy, primary fishing activity picked up during the review quarter when compared with the same period of 2015. Fish purchases by local processing companies increased by 18% and reached 16,784.1 metric tonnes in Q4-2016, when compared with the corresponding quarter of 2015. This was largely due a considerable increase in skipjack tuna purchases during the review period. On the exports front, the available data3 on fish exports also pointed towards a strengthening of activity in the review quarter as the volume of fish exports during Oct-Nov 2016 increased by almost 49% when compared with the same period of 2015. Further, export earnings during the period OctNov 2016 increased by 23% when compared with the same period a year ago, mainly due to the increase in volume of such exports. Construction In line with the recent trend, construction sector is expected to have grown robustly during Q4-2016. Leading indicators used to gauge the performance of construction sector, such as bank credit to the sector and construction-related imports suggested that activity in the sector remained strong during the quarter. In annual terms, bank credit to the construction sector increased by 37% during the review quarter, while construction-related imports (wood, metal, cement and aggregates) during the period Oct-Nov 2016 grew by 23%, when compared with the same period of 2015. This significant growth in the sector was mainly attributed to the large infrastructure projects that are currently underway. sources market from the Asia and Pacific region as well as the single largest source destination— Trade data for December 2016 was not available at the time of compilation of report. 3 Quarterly Economic Bulletin - December 2016 | 5
12. Wholesale and Retail Trade Looking at the wholesale and retail trade sector , activity in the sector is expected to have grown further during Q4-2016 when compared with the same period a year ago. Available indicators such as bank credit to commerce and private sector imports (excluding tourism) pointed to positive growth in the review period. Bank credit to commerce sector registered an annual growth of 7% at the end of December 2016, while private sector imports during the period Oct-Nov 2016 increased by 27%, when compared with same period of 2015. Inflation 2.5 volatile fish prices registered a growth rate of 2.3%, while inflation excluding the food and non- 1.0 mainly caused by an increase in the prices of food items. Meanwhile, price growth in housing and utilities; and furnishing and household equipment, as well as the slower pace of decline in the transport sector prices contributed to the overall rise in price level (Figure 3). Food prices rose by 4.6%, while food and nonalcoholic beverage prices excluding fish posted a growth of 7.3% in Q4-2016. The growth of food prices was owing to the significant reduction in the government food subsidies during October 2016. This increase was cushioned, to some extent, by the fall in the prices of vegetables, namely, cabbages; root crops and non-starchy bulbs; and potatoes. Meanwhile, fish prices—the most volatile and heavily weighted component of CPI—further declined by -3.0% after registering -2.6% in Q32016. 4 Inflation analysis is based on CPI data at the national level. 6 | Quarterly Economic Bulletin - December 2016 2 1 1.5 0 Energy related items Transport services Rent Food excluding fish Fish Other Health Education CPI (left axis) Source: National Bureau of Statistics Nov-16 Jul-16 Sep-16 May-16 Jan-16 Mar-16 Nov-15 Jul-15 Sep-15 -1.0 May-15 -0.5 Jan-15 0.5 0.0 Mar-15 review period. The hike in the inflation rate was 3 3.0 2.0 alcoholic beverages index stood at 0.9% during the 4 3.5 Nov-14 consecutive quarters. Inflation excluding the 4.0 Jul-14 inflation rate of -0.4% during the past two Sep-14 rose to 1.8% in Q4-2016, after recording negative (annual percentage change, percentage point contribution) Mar-14 percentage in the Consumer Price Index [CPI4]) Figure 3: Contribution of Sub-Categories to CPI Inflation, 2013-2016 May-14 The rate of inflation (as measured by the annual -1 -2
13. Prices in the housing and utilities category , which accounts for 23% of the total CPI, registered an inflation rate of 0.7% during Q4-2016. This was largely driven by the increase in housing rentals, which was partly offset by a fall in utility prices. As for the furnishing and household equipment category, the prices increased in the review period to 3.2%, largely contributed by an increase in prices of major household appliances such as oven and stove. Looking at other categories of the CPI, prices in the transport sector registered an overall decline in Figure 4: Composition of Domestic Claims on Government, 2015-2016 (millions of rufiyaa) the review quarter, owing to a fall in prices of fuels and lubricants. However, this was partly offset by an increase in prices charged for transport services. This resulted to a slowdown in the overall price decline in the transport sector. In addition, prices of the education sector also contributed to the 14% 32% Loans and advances Q4-2015 Treasury bills overall inflation, registering a price growth of 4.4% in Q4-2016. The price growth in this category was largely driven by price increases in post-secondary Treasury bonds 54% non-tertiary education; and secondary education sectors. 12% Public Finance 5 33% Loans and Q4-2016 According to the latest data on domestic financing, Treasury b Treasury b the total outstanding stock of domestic claims6— which included treasury bills, treasury bonds and 55% loans and advances to the government—increased to MVR26.4 billion at the end of December 2016 from MVR25.0 billion at the end of September 2016. The growth of domestic claims reflected a Source: Maldives Monetary Authority net borrowing of MVR1.4 billion during Q4-2016 when compared with MVR550.6 million during the corresponding quarter of 2015. Delving into the sources of domestic financing, the outstanding stock of government securities reached MVR23.2 billion at the end of December 2016, depicting a net borrowing of MVR1.4 billion The total revenue and expenditure data for Q4-2016 was not available at the time of compilation of report. 5 6 Excluding publicly guaranteed debt and external financing. Quarterly Economic Bulletin - December 2016 | 7
14. during Q4-2016 . This indicated that the growth of domestic claims during the quarter was obtained entirely from the issuance of government securities. As for the composition of government securities, treasury bills remained the largest source of financing during the quarter, followed closely by treasury bonds (Figure 4). The growth in treasury bills investment (of MVR897.1 million) during the review quarter largely reflected the increased investment by the commercial banks, public non-financial corporations (PNFC) and the private sector (Figure 5). Moreover, net issuance of treasury bonds (of MVR489.7 million) during the review quarter also contributed to the growth in government securities. The increase in treasury bonds was mainly due the conversion of part of the treasury bills held by an other financial corporation (OFC) to treasury bonds. Figure 5: Treasury Bills by Holder, 2013-2016 (millions of rufiyaa) 16000 14000 12000 10000 With regard to loans and advances to the government, a modest growth of MVR36.1 million was recording during Q4-2016. At the end of December 2016, total loans and advances to the government stood at MVR3.2 billion which was only a slight increase from MVR3.1 billion a year ago. Money and Banking With regard to the developments in monetary aggregates, reserve money (M0) continued its declining trend in annual terms and fell by 13% at the end of December 2016 (Figure 6). The pace of decline accelerated from 5% at the end of September 2016. The decline in M0 was entirely due to a fall in the net foreign assets (NFA) of the MMA. It was partly offset by an increase in the net domestic assets (NDA) of the MMA during the review period. Accordingly, the NFA of the MMA declined by 36% at the end of December 2016, when compared with a decline of 15% at the end of September 2016. 8 | Quarterly Economic Bulletin - December 2016 8000 6000 4000 2000 0 2013 2014 Commercial banks 2015 MMA OFCs 2016 PNFCs Private parties Source: Maldives Customs Service, Maldives Monetary Authority
15. The fall in NFA of the MMA reflected the decline in foreign currency deposit of the MMA as a result of the drawdown in foreign currency reserve account balances of commercial banks at the MMA . Meanwhile, NDA of the MMA registered a growth of 82% in annual terms from 72% at the end of September 2016, which partially offset the annual decline in the NFA of the MMA. The growth of the MMA’s NDA mainly reflected the purchase of a corporate bond issued by a state-owned enterprise (SOE). During the review quarter, total liquidity absorbed by the MMA’s monetary operations via the MMA’s Overnight Deposit Facility (ODF) declined. The MMA absorbed MVR3.0 billion on average during Q4-2016 via the ODF, which was a fall of MVR12.7 million when compared with the corresponding quarter of 2015. Figure 6: Changes in Reserve Money and Broad Money, 2013-2016 (annual percentage change) 50 40 30 With regard to the annual broad money (M2) growth, it registered an annual growth of less than 1% at the end of December 2016. The pace of growth decelerated from 6% at the end of September 2016 and the total stock of broad money stood at 20 10 0 (10) (20) (30) 2013 2014 Growth in M0 2015 2016 Growth in M2 MVR30.5 billion at the end of December 2016. On the components side (quasi and narrow money): Source: Maldives Monetary Authority main contributor to the annual slowdown in M2 was an annual decline in quasi money. This decline was driven by a 9% decline in foreign currency transferable deposits. Looking at the counterparts of M2, the annual slowdown in M2 growth was entirely due to acceleration in decline of the NFA of the banking system. Accordingly, the NFA declined by 37% at the end of Q4-2016 when compared with a 12% decline at the end of Q3-2016, which can be attributed to the decline in NFA of both the MMA and commercial banks. This was entirely offset by the accelerated growth of the NDA during the review period. The acceleration of NDA growth, which increased from 20% at the end of Q3-2016 to Quarterly Economic Bulletin - December 2016 | 9
16. 25 % at the end of Q4-2016, can be attributed to the of MVR237.0 million and MVR213.8 million, increase in growth of domestic credit. The faster respectively. pace of growth of domestic claims was mainly due to the significant growth in claims on PNFCs. With regard to the weighted average rates on loans and advances to the private sector, rates on local With regard to the various components of NDA, currency loans recorded declines of 4 basis points net claims on central government (NCG) of the (bps) and 20 bps at the end of December 2016 when banking system rose by 18% in annual terms and compared with September 2016 and December stood at MVR13.4 billion at the end of December 2015, respectively. Moreover, rates on foreign 2016. This was a deceleration when compared currency loans also registered a decline of 7 bps with the 28% growth at the end of September when compared with September 2016. However, 2016, entirely reflecting an increase in government rates on both local and foreign currency loans demand deposits at the MMA, due to increase in increased at the end of December 2016 by 24 bps government revenue. On the asset side, claims on when compared with December 2015. central government by the banking system grew at a faster pace in annual terms when compared with Banking Sector Performance the end of Q3-2016. This was due to the increase The key indicators of banking sector depicted in treasury bills investment by commercial banks from 23% at the end of September 2016 to 29% at the end of December 2016. As for the annual growth of credit to the private sector by commercial banks (aggregate of both local currency and foreign currency loans), a deceleration was registered from 15% at the end of September 2016 to 10% at the end of December 2016. This was mainly due to the slowdown in credit extended to the tourism sector (which accounted for 39% of total private sector credit), particularly for working capital. However, credit extended for renovation of resorts showed improvement during the review period when compared with Q3-2016. As for other sectors, credit extended to the construction sector (which accounted for 18% of total private sector credit) continued its robust upward trend, registering an annual growth of 37% (MVR903.5 million) at the end of Q4-2016. This was entirely fuelled by credit extended for residential housing. Meanwhile, credit extended to transport and commerce sectors also registered increases 10 | Quarterly Economic Bulletin - December 2016 further improvements during Q4-2016 when compared with Q4-2015. Net assets of the commercial banks registered an annual growth of 6% (MVR2.5 billion) at the end of Q4-2016. Delving into the composition of net assets, the growth in net assets was mainly contributed by the increase in treasury bills investments and net loans during Q4-2016. While investment in treasury bills rose by 31% (MVR2.4 billion) in annual terms, net loans rose by 14% (MVR2.2 billion). Looking at the asset quality of the banks, nonperforming loans (NPL) continued its downward trend during the year 2016 and decreased by 14% (MVR0.4 billion) at the end of Q4-2016, when compared with the corresponding quarter of 2015. Accordingly, the NPL ratio (NPL’s as a percent of total loans) remained at 11% during the quarter, unchanged from the previous quarter, whereas the ratio was at 14% a year ago. Moreover, throughout the review period, adequate provisioning was maintained by the commercial banks, fully covering the NPL portfolio.
17. The capital adequacy of the banking sector remained robust , as the capital ratios were maintained well above the minimum requirement. Accordingly, the total risk-weighted capital ratio increased to 45% at the end of Q4-2016 from 42% at the end of Q4-2015, reflecting the large share of low risk assets in the commercial banks’ portfolio. With respect to the profitability of the banking industry, the pre-tax profits earned by the commercial banks increased by 40% when compared with Q4-2015 and totalled MVR2.7 billion during Q4-2016. This was mainly due to the improved interest income earned by the commercial banks owing to increased lending. Moreover, the reversal of loan loss provisions resulting from large Figure 7: Composition of Fish Exports Earnings, Oct-Nov 2016 (annual percentage change) loan recoveries during the year also contributed to the increase in pre-tax profits. 7% External Trade 2% 26% 9% During the review period (Oct-Nov 2016 ), the 1% 7 Skipjack Yellowfin tuna Bigeye tuna total merchandise exports (f.o.b.) increased by Canned or pouched 29% (US$10.5 million) in annual terms and totalled Processed fish, nes US$194.6 million. This reflected the annual increase in both domestic exports and re-exports, which rose 55% Other by 21% (US$5.2 million) and 46% (US$5.3 million), respectively during the period. The annual increase Source: Maldives Customs Service in domestic exports was almost entirely due to a growth in fish exports, while the annual increase in re-exports was driven by a growth in other reexport, and jet fuel sold to international aircraft at the Velana International Airport. The annual growth in fish exports—which grew by 23% (US$5.4 million) during the period—was largely on account of a considerable growth in the earning from yellowfin tuna and skipjack tuna exports (Figure 7). Frozen skipjack tuna registered a growth of 58%, while frozen yellowfin tuna exports increased almost by four-fold during the period Trade data for December 2016 was not available at the time of compilation of report. 7 Quarterly Economic Bulletin - December 2016 | 11
18. (Figure 8). This was mainly due to an increase in the volume of such exports. However, the growth in fish exports was slightly offset by a decline in earnings from fresh or chilled yellowfin tuna exports. Earnings from fresh or chilled yellowfin tuna exports declined by 13% in the period OctNov 2016, despite the increase in the volume of such exports during the period. The expenditure on imports (c.i.f.) increased by 13% (US$43.0 million) in annual terms and summed to US$362.4 million during the period Oct-Nov 2016. The increase was mainly contributed by an increase in machineries and mechanical appliances, followed by construction sector-related items; furniture, fixtures and fitting; and petroleum Figure 8: Annual Changes in the Value of Fish Exports, Oct-Nov 2016 (thousands of US dollars) 3500 3000 2500 2000 1500 1000 500 0 500 Skipjack Yellowfin tuna Bigeye tuna Other tuna products (Figure 9). The growth in machinery and mechanical appliances and construction sector- Fish (excluding tuna) Canned or pouched Processed fish, nes Source:Maldives Customs Service related items reflected the robust performance of the construction sector and the large infrastructure projects that are underway. Furthermore, import value of petroleum products increased due to a surge in oil prices in the international market. Direction of Trade During the period Oct-Nov 2016, Asia and Europe Figure 9: Composition of Imports, (Oct-Nov) 2015-2016 (millions of US dollars) remained the main destinations of exports, 80.00 accounting for 58% and 32%, respectively. During 60.00 the period, exports to Asia improved by 63% in 40.00 annual terms, however, exports to Europe fell by 7%.The improvement in exports to Asia was almost entirely owing to the increase in exports to Thailand. Thailand remained the major Asian export market (72% of total export to Asia), and recorded a significant increase in annual terms during the period. This was mainly due to the growth in export earnings from frozen skipjack and yellowfin tuna. Meanwhile, all major European export markets, except for Germany (increased by 23%), recorded a decrease in exports. These European markets included France (decreased by 5%), UK (19%), Italy (17%), and Netherlands (90%). Main exports to these countries included fresh or chilled yellowfin tuna. 12 | Quarterly Economic Bulletin - December 2016 70.00 50.00 30.00 20.00 10.00 0.00 Food Items Petroleum Products Wood, Metal, Cement And Aggregates Oct-Nov 2015 Source: Maldives Customs Service Machinery and Mechanical Appliances and Parts Oct-Nov 2016 Furniture, Fixtures and Fittings Transport Equipments and Parts
19. Looking at the direction of imports , Asia was the largest source of imports with a share of 80% during Oct-Nov 2016, followed by Europe with 12%. The main source countries of imports from Asia were United Arab Emirates (UAE) with a share of 25%, Singapore (17%), India (16%), and China (11%). Similar to previous quarter, UAE remained the major supplier of petroleum products during the review period. However, it is noteworthy that imports from China recorded a significant increase in the same period. This was mainly due to an increase in import of machinery and mechanical appliances from the country, largely for the ongoing China-Maldives Friendship Bridge project. In addition to this, imports from Singapore decreased during the review period mainly due to a significant decline in import of petroleum products, machinery and mechanical appliances, and food items compared with the corresponding period of 2015. Figure 10: Gross International Reserves, 2013-2016 (millions of US dollars) 800 700 600 500 400 300 Gross International Reserves The Gross International Reserve (GIR8) stood at US$467.1 million at the end of December 2016, registering a decline of 17% and 14% when compared with December 2015 and September 200 100 0 2013 2014 2015 2016 Short term foreign liabilities (left axis) Usable reserves (left axis) Gross international reserves (left axis) Source: Maldives Customs Service, Maldives Monetary Authority 2016, respectively (Figure 10). The annual decline in GIR was due to the decline in commercial bank’s reserves held at the MMA. Meanwhile, the usable reserves9 component of the GIR amounted to US$200.0 million at the end of December 2016. The usable reserves grew marginally in annual terms, while it increased by 4% when compared with September 2016. The slight annual growth in usable reserves was due to an increase in foreign currency revenue receipts during Q4-2016. GIR comprises of foreign currency deposits of the MMA and the government, commercial bank’s US dollar reserve accounts and Maldives’ reserve position in the IMF. 8 Usable reserves = GIR — Short-term foreign liabilities. This shows the amount of funds readily available for use by the MMA in the foreign exchange intervention. 9 Quarterly Economic Bulletin - December 2016 | 13
20. Exchange Rates With effect from 11 April 2011 , the Maldivian rufiyaa was allowed to fluctuate within a horizontal band of 20% on either side of a central parity of MVR12.85 per US dollar. With the introduction of the exchange rate band, the exchange rate of the rufiyaa per US dollar moved towards the upper limit of the band, owing to the persistent foreign exchange pressure in the economy. Mirroring the movement of the US dollar against the major trading partners of the Maldives at the end of December 2016, the bilateral exchange rates of the rufiyaa appreciated in annual terms against the pound sterling by 17%, the Chinese yuan by 6%, the euro by 4%, the Singapore dollar by 3%, the Indian rupee by 2% and the Sri Lankan rupee by 4%. However, rufiyaa has depreciated by 2% against the Japanese yen. When compared with September 2016, the rufiyaa has appreciated against all major currencies; the Japanese yen by 13%, the euro and Singapore dollar by 7%, the pound sterling by 6%, the Chinese yuan by 4%, the Indian rupee by 2%, and the Sri Lankan rupee by 2%. 14 | Quarterly Economic Bulletin - December 2016
21. Statistical Appendix
23. Table of Selected Economic Indicators , 2013–2016 (annual percentage change over the corresponding period, unless stated otherwise) The inflation rate for the year refers to the period average values, whereas inflation for the quarter represents the annual percentage change in the three-month-average Monetary operations figures represent the average investment. 3/ Open market operations were suspended from May 2014 onwards. Source: Ministry of Tourism, Ministry of Fisheries and Agriculture, Ministry of Finance and Treasury, National Bureau of Statistics, Maldives Customs Service, Maldives Airports Company Limited, Gan International Airport, Maldives Monetary Authority. 1/ 2/ Quarterly Economic Bulletin - December 2016 | 17
24. Table of Selected Economic Indicators , 2013–2016 (annual percentage change over the corresponding period, unless stated otherwise) Data relating to trade was only available upto November 2016 at the time of compilation of report. Source: Ministry of Tourism, Ministry of Fisheries and Agriculture, Ministry of Finance and Treasury, National Bureau of Statistics, Maldives Customs Service, Maldives Airports Company Limited, Gan International Airport, Maldives Monetary Authority. 4/ 18 | Quarterly Economic Bulletin - December 2016
25. MALDIVES MONETARY AUTHORITY Boduthakurufaanu Magu Male ’ - 20182 Republic of Maldives Tel: (960) 3312343 Fax: (960) 3323862 Email: mail@mma.gov.mv Website: www.mma.gov.mv