MPC Press Release - December 2006
The economy is closing the year with robust GDP growth estimated to be some 6.2 percent. Inflation expectations remain subdued and converging towards the single-digit; and the external payments position has been resilient to the high and volatile oil prices of the past year, with the current account deficit reduced and another overall balance of payments surplus estimated for 2006.
Price developments during the last quarter of 2006 continued to show signs of diminishing inflation expectations. Headline inflation measured by the consumer price index was 10.3 percent for November 2006, the fourth consecutive month of decline in inflation after rising to 11.4 percent in July with the pass-through of increases in crude oil prices on to the domestic market. This is underlined by negative or small monthly increases returning the index back to the level reached in June 2006 and to the path of declining inflation. All the Bank’s indices of core inflation remained flat in November, and all pointed to a downward trend in underlying inflation, well within or close to the single digit zone.
Developments in the real sector show an expanding economy. The Bank’s Composite Index of Economic Activity increased by 3.3 percent in the fourth quarter, and by 11.5 percent in real terms (year-on-year) or above the trend growth of 10.1 percent. All components of the index registered significant increases. The Bank’s survey of Business and Consumer Confidence also shows significant increases in both business and consumer confidence in the economy and prospects for improved macroeconomic conditions in 2007.
Along with the upswing in economic activity, bank credit to the private sector and public institutions increased by 44 percent (¢7,211 billion) to ¢23,780.3 billion in the 12-month to October 2006 compared with an increase of 23 percent (¢3,130 billion) to ¢16,569.5 billion in the corresponding period of 2005.
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