Overview:
 The Gambian
economy is a highly open type as
measured by export and import ratios to GDP, however, as much as 80 percent of exports
consist of re-exports. The main domestically-originating exports
are groundnuts and
tourism.
The Gambia has recently run
substantial trade and current-account deficits financed largely
by official grants and loans, and increasingly foreign direct
investment inflows.
Foreign direct investment in 2003-2005
averaged more than 10 percent of GDP. The country's economy is mainly
reliant mainly agricultural exports as a
foreign currency earner.
Entrepot (re-export) trade from
Banjul Ports makes up a significant portion of economic
activity though the devaluation of the CFA Franc in 1994 reduced
it somewhat.
Tourism, which mostly takes the form of
sun seekers, birdwatchers and African-Americans, makes up about
about 18% of the Gambia's GDP.
Economic development is very reliant on
continued multilateral and bilateral aid and on prudent economic management
by the government as espoused by the International Monetary
Fund's fiscal
help and advice.
The Gambia is among the poorest countries of the world, ranking 155th out of 177 countries in the 2007/2008 UNDP
Human Development
Index rankings (HDI). According to the
UNDP's Human Poverty
Index (HPI-1) of 2004 poverty is was at 40.9 percent, with rural poverty
slightly exceeding urban poverty rates, except in
Banjul where
the rate is much lower. The Gambia’s per capita
GDP measured at PPP is higher than Benin, Senegal or Togo, but
literacy is low by regional standards. Services account for over
50 percent of GDP, reflecting the importance of re-export trade
and tourism. Agriculture accounts for about a third of GDP but
more than 70 percent of employment. The
manufacturing sector is
undeveloped even by West African standards, providing only 5
percent of GDP and displaying little dynamism.
Macroeconomic performance deteriorated in 2002–03, reflecting
the impact of loose fiscal policy, accommodating monetary policy
and a drought. Inflation rose from an average of less than 5
percent in 2001 to 17 percent in 2003, the highest level in
nearly two decades. The dalasi depreciated by 55 percent in
nominal effective terms between end-2001 and end-2003. The seeds
for the poor performance were sown in 2001 when a combination of
significant unbudgeted expenditures and a fall in tax revenues
led to a large increase in government borrowing from the Central
Bank of The Gambia (CBG) and a sharp rise in domestic debt. Real
GDP declined by 3 percent in 2002 because of a drought, but
recovered in 2003.
The 2002 IMF Poverty Reduction and Growth Facility (PRGF) loan
was cut off in 2002 following spending overruns and
irregularities at the CBG. The Gambian
government has sought to re-establish a program with the Fund
through a Staff-Monitored Program (SMP) as an interim step
towards re-establishing a PRGF. The IMF notes that fiscal and
monetary policies have been tightened lately, contributing the
sharp decline in inflation, from double digits in 2003-2004 to
4.5 percent in 2005. Nevertheless, the IMF expresses continued
concerns about slippages in fiscal discipline, extra-budgetary
expenditures, and inadequate auditing of both fiscal and
monetary accounts. The Gambia’s fiscal policy is also
constrained by a large domestic debt and high real interest
rates, such that a substantial primary surplus is required to
cover interest payments.
As at 2008 The Gambia currently has a Staff Monitored Programme
with the IMF, as part of a Medium Term Economic Framework Plan.
The agency has reported some modest progress on fiscal balance
and some improvements in financial management.
A tightening of fiscal and monetary policies from late-2003
restored macroeconomic stability and contributed to sustained
growth. The basic primary fiscal balance moved from a deficit of
over 1 percent of GDP in 2001 to an average surplus of nearly 9
percent of GDP during 2004–07. Yields on treasury bills
rose from 15 percent at end-2001 to 31 percent at end-2003
before declining to 10–15 percent from mid-2005. Inflation fell
to less than 1 percent at end-2006 before a spike in the prices
of some imported food items pushed it to around 6 percent during
most of 2007. Real GDP expanded at a robust average annual rate
of 6.5 percent, led by the tourism, telecommunication, and
construction sectors. Tourism infrastructure has been a major
beneficiary of foreign direct investment (FDI).
Gambia’s longer term policy objectives are sketched in the
ambitious Vision 2020 document which aims to turn Gambia into a
diversified middle income economy with the private sector as "a
serious partner in national development and the very engine of
growth."
Selected Indicators:
Agriculture:
Products: groundnuts (140,000 tonnes - 2005),
rice, millet,
sorghum, corn, sesame, cassava, palm kernels;
livestock: cattle, sheep,
goats
Budget:
revenues:
$181.1 million
expenditures: $163.4 million (2007 est.)
Current Account Balance:
-$70 million (2007 est.)
Export
Commodities:
Groundnut products,
fish, raw
cotton, palm kernels, hides & entrepot trade
Export Partners (Principle):
India 36.5%, China 15%, UK 9%, Indonesia 7.8%, France 4.9%,
Belgium 4% (2006)
Exports:
$93 million
f.o.b. (2007 est.)
External Debt:
$628.8 million
(2003 est.)
Foreign Exchange Reserves:
$142.8 million (31 December 2007 est.)
Gross Domestic Product (Estimates -
2007):
GDP (Official Exchange Rate)
$653 million
GDP (PPP)
$2.106 billion
GDP
Real Growth Rate
7%
GDP Per Capita (PPP)
Purchasing
Power Parity
$1,300
GDP Composition by Sector
agriculture: 32.8%
industry: 8.7%
services: 58.5%
Industries:
Processing peanuts, fish, and hides; tourism; beverages; agricultural
machinery assembly, woodworking, metalworking & clothing
Imports:
Commodities: foodstuffs
incl. rice, flour, sugar, manufactured goods, petroleum, heavy fuel
oil, cement bulk & bags, auto vehicles, machinery equipment
.
Import Partners:
China
24.3%, Senegal 11.5%, Cote d'Ivoire 8.3%, Brazil 6.7%,
Netherlands 5.2% (2006)
Imports:
$271 million
f.o.b. (2007 est.)
Inflation - Annual:
(consumer price index)
7.0 % per cent 2008
Labour Force:
400,000
Labour Force by Occupation:
agriculture 75%, industry, commerce, and services 19%,
government 6%
Unemployment Rate:
The
Gambia's unemployment rate is very high though no exact figures
are available.
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Central Bank of The Gambia: (CBG)
MPC Press Release (27th February, 2009).
End-period inflation:
As a result of the sharp downturn in
global demand, commodity prices have fallen, especially for energy,
and inflationary pressures have subsided in the major advanced
economies.
On the domestic front, end-period inflation, measured by the National
Consumer Price Index (NCPI) rose from 5.1 percent in January 2008 to
7.0 percent in January 2009. Annual average inflation rate was 4.6
percent compared to 5.7 percent a year earlier.
Food and non-food consumer price inflation rose to 8.8 percent and 4.7
percent in January 2009 compared to 8.4 percent and 1.4 percent
respectively in January 2009. Core inflation also rose from 5.4
percent in January 2008 to 6.9 percent at end-January, 2009.
Inflationary Outlook:
The acceleration in inflationary pressures is expected to reverse in
the second half of 2009 given the downward trend in global commodity
and oil prices. The risk to the outlook stems from the high growth in
money supply.
Other Details:
Money supply grew by 19.3 percent in the year to end-January 2009
compared to 3.9 percent in the preceding year. Reserve money increased
by 12.7 percent compared to 0.1 percent during the same period.
Total domestic credit increased to D6.7 billion in January 2009, or
51.9 percent from a year ago. Private sector credit rose by 41.3
percent to D3.8 billion. Credit to distributive trade, building and
construction and manufacturing increased by 34.1 percent, 46.2 percent
and 80.9 percent respectively from a year earlier. In contrast, loans
and advances to agriculture, tourism and fishing contracted by 25.8
percent, 1.4 percent and 2.4 percent respectively.
The banking industry remains sound. Total industry assets rose by 19.5
percent to D12.5 billion year-on-year as at end-December 2008. The
risk-weighted capital adequacy ratio stood at 35.9 percent in December
2008, well above the statutory requirement of 8 percent.
Non-performing loans rose from 7.3 percent in September 2008 to 9.5
percent in December 2008. However, nonperforming loans were adequately
provisioned in compliance with the statutory requirement.
Data on government fiscal operations indicated that
revenue and grants
amounted to D3.6 billion in 2008 compared to D3.7 billion in 2007. The
decline in revenue and grants was on account of the decrease in
indirect tax and non-tax revenue, and the less-than expected grant
receipts. Total expenditure and net lending amounted to D4.1 billion,
an increase of 13.8 percent. The overall budget balance (including
grants) on commitment basis deteriorated to a deficit of D490.2
million (2.7 percent of GDP) in 2008 from a surplus of D27.7 million
(0.2 percent of GDP) in 2007.
As at end-January 2009, the total outstanding domestic debt stood at
D5.9 billion (31.2 percent of GDP). Treasury bills, accounting for
79.7 percent of total domestic debt, declined by 1.2 percent to D4.71
billion. The distribution of Treasury bills by maturity showed that
the 364-day bills accounted for 70.6 percent of the outstanding stock,
182-day bills (16.0 percent) and 91-day bills (13.4 percent).
The yield on the 91-day and 364-day bills increased to 10.53 percent
and 14.41 percent in January 2009 from 9.94 percent and 14.03 percent
in December 2008 respectively. In contrast, the yield on the 182-day
bill declined to 12.09 percent from 12.48 percent during the same
period.
Volume of transactions in the inter-bank foreign exchange market in
the year to end-January 2009 amounted to D35.1 billion (US$1.3
billion) compared to D37.8 billion (US$1.7 billion) a year ago.
In the year to end-January 2009, the Dalasi depreciated against major
international currencies traded in the inter-bank market except the
British Pound, reflecting the impact of the global financial crisis on
remittances and tourism as well as increased demand for foreign
exchange to meet the high cost of imports. The dalasi weakened against
the US dollar and Euro by 16.7 percent and 1.9 percent respectively.
The Dalasi however, appreciated against the British Pound by 15.9
percent. From December 2008 to end-January 2009, the Dalasi
strengthened against the British Pound, US Dollar, Swiss Franc,
Swedish Kroner, and Euro by 7.2 percent, 1.8 percent, 9.1 percent,
14.4 percent and 6.0 percent respectively.
Balance of Payments estimates indicate an overall deficit of D1.30
billion ($54.6 million) in 2008 compared to an estimated surplus of
D796.80 million ($32.0 million) in 2007, reflecting the deterioration
in both the current and the capital and financial accounts. The goods
account balance deteriorated to a deficit of D5.27 billion in 2008, or
by 23.4 percent. Exports are estimated at D2.16 billion in 2008, or a
decrease of 5.1 per cent from 2007. The import bill rose to D7.41
billion, or 13.3 per cent from 2007. Projections for 2009 indicate
deterioration in the overall balance emanating from the on-going
slowdown in global economic activity which is expected to adversely
impact remittances, foreign direct investment and tourism.
Reflecting the widening of the current account deficit, gross
external
reserves stood at US$116.8 million at end-January 2009 compared to
US$140.4 million in January 2008.
The Monetary Policy Committee has decided to maintain the Rediscount Rate at 16.0 percent.
Source: MPC at the CBG
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