Economy grows by 0.1 percent

MASERU – THE Central Bank of Lesotho (CBL) Governor, Dr Retšelisitsoe Matlanyane has expressed concern over the weak economic growth in the country.
The governor made the remarks during a Monetary Committee Policy statement delivered in Maseru on Tuesday.
“According to the CBL measure of economic activity, the economy grew by 0.1 percent in November, the same rate recorded in October 2019,” Dr Matlanyane said.

Dr Matlanyane attributed the sluggish economic performance to the generally weak supply side.
“In the labour market, employment by the Lesotho National Development Corporation (LNDC) assisted firms declined further in the third quarter, consistent with lower demand for some of the large firms’ products in the overseas markets,” she said.

The inflation rate measured by year-on-year percentage change in consumer price index (CPI), is said to have increased from 4.6 percent in November 2019 to 4.9 percent December 2019.
“The major contributors to this position include food and non-alcoholic beverages, clothing and footwear, housing, electricity, gas and other fuels,” Dr Matlanyane said.
Money supply, as measured by M2 increased by 0.3 percent in the quarter ending December 2019, following an increase of 7.3 percent in the previous quarter.

According to Dr Matlanyane the increase was driven by net foreign assets despite a decline in net domestic claims.
Private sector credit decreased by 1.9 percent in December 2019 compared to 7.1 percent in September 2019.
The external sector position worsened in the third quarter, on account of a widening current account deficit despite an improvement in the primary and secondary income accounts.
“Consequently, gross international reserves fell from 4.2 months of import cover from 4.5 months in the second quarter.

Meanwhile, economic activity in emerging market economies including China and South Africa has remained relatively low.
China’s economic growth increased by 6 percent in the fourth quarter of 2019.
In South Africa, low business confidence continues to undermine growth prospects in the medium term, while risks to long term growth emanate largely from structural challenges.
The annual rate of headline inflation in South Africa, measured by changes in CPI for all urban areas was recorded at 4 percent in December 2019, up from 3.6 percent in November 2019.

Dr. Matlanyane said global economic activity is expected to stabilise.
“However, downside risks to global economic outlook continue to be prominent including political and trade tensions,” she said.
She said domestic growth has remained subdued facing risks like exposure to international developments and domestic structural rigidities and policy uncertainty.

Lemohang Rakotsoane