Global Economic Growth Weakening-Governor Central Bank of Lesotho

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The Central Bank of Lesotho Governor, Dr Emmanuel Letete says economic activity continues to slow down for most economies.

He disclosed this at the press conference after the Monetary Policy Committee (MPC) of the Central Bank of Lesotho held its 99th meeting.

He said the inflation pressures in most economies remain high despite the slowdown observed in recent months, adding that global growth is expected to further weaken due to the ongoing Russia-Ukraine war and tighter global financial conditions.

He noted that the Committee noted that global economic activity has been projected to slow down in 2023 as many economies continue to grapple with the cost-of-living crisis and high debt levels, saying, the resurgence of COVID-19 in some countries and the escalating Russia-Ukraine war continue to weigh negatively on global economic recovery.

According to the IMF, World Economic Outlook Update, the global economy is projected to slow down to 2.9 percent in 2023.

Dr Letete mentioned that most economies showed signs of deterioration in real GDP in the third quarter of 2022, saying growth was hampered by elevated inflationary pressures that weighed negatively on aggregate demand. He added that China’s economic performance improved in the third quarter, but lost momentum in the fourth quarter.

He stressed that domestic inflation continued to moderate due to the decline in the non-food component and the inflation rate declined from 8.1 percent in November to 8.0 percent in December 2022, noting that despite the slowdown observed in recent months, inflation is expected to remain high in the medium term due to amongst others, high food inflation and protracted supply chain disruptions.

“Money supply fell by 0.2 percent in the quarter ending in December 2022, compared to an increase of 5.5 percent in the previous quarter, credit to the private sector fell by 0.2 percent, compared to a 3.1 percent increase in the quarter ending in September 2022. This fall was mainly attributable to credit extended to business enterprises while credit to households remained relatively unchanged,” he stressed.

He noted that the government budgetary operations recorded a surplus equivalent to 4.7 percent of GDP in the fourth quarter of 2022 compared to a revised deficit of 6.0 percent of GDP in the previous quarter and this reflected a significant decline in government expenditure against a slight increase in total revenue.

He said the level of CBL’s Net International Reserves (NIR) improved between November 2022 and January 2023. It (the NIR) remained above the target floor of US$650 million set by the MPC in its meeting in November 2022 and was adequate to support the loti-rand exchange rate peg.

The Committee is expected to closely continue to assess the global economic developments and their impact on the domestic economy especially the Net International Reserves(NIR) and respond accordingly.

Distributed by APO Group on behalf of Government of Lesotho.