MEFD December 2008

Published: Monday February 2nd, 2009

During December, domestic economic developments continued to be adversely affected by the slump in global economic activity. Additional layoffs in the hotel sector pointed to significantly reduced seasonal activity and weakness in the short-tem outlook for tourism. Meanwhile, support for private consumption and investment expenditures remained subdued, owing both to weak employment conditions and the accumulated slowdown in credit expansion. Buoyed by the pass-through effects of earlier commodity price increases on consumer goods and services, the average inflation rate firmed during 2008. On the monetary front, both liquidity and external reserves contracted during December, as the expansion in credit contrasted with a net withdrawal of deposits from banks. However, their levels were significantly improved in the annual comparisons, as the abatement in credit expansion paced ahead of the slowdown in deposit growth. The economic deterioration also contributed to further erosion in credit quality indicators in the banking sector.

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