TOURISM DRIVES RISE IN NET FOREIGN ASSETS

Summary of the Monthly Bulletin of December 2018

Monetary developments            
Compared to November 2018, money supply expanded in December 2018 by Afl. 24.3 million to Afl. 4,376.9 million, due to a rise in net foreign assets (+Afl. 72.0 million), which was largely offset by a decrease in net domestic assets (-Afl. 47.7 million).

The contraction in the domestic component of the money supply was due to a reduction in domestic credit (-Afl. 48.2 million) and an increase in the non-credit related balance sheet items (+Afl. 0.5 million). The decline in domestic credit was the result of a drop in net claims of the banking sector on the public sector (-Afl. 47.1 million), and to a lesser extent, by less claims of the banking sector on the private sector (-Afl. 1.1 million).

Claims of the banking sector on the private sector contracted due to decreases in consumer credits (-Afl. 6.4 million) and business loans (-Afl. 0.4 million), while housing mortgages increased (+Afl. 5.0 million). The drop in net claims of the banking sector on the public sector was caused by a decline in gross claims (-Afl. 14.0 million) and a rise in government deposits (+Afl. 33.1 million).

The increase in the net foreign assets of the banking sector resulted from net purchases of foreign exchange from the public (+Afl. 334.8 million), mainly associated with foreign exchange revenue from tourism exports. This was partially offset by net sales of foreign exchange to the public (-Afl. 262.8 million), related mostly to payments for goods.

Inflation
The consumer price index (CPI) for December 2018 noted a 4.6 percent increase year-over-year (YOY). The main contributors to this rise were the components “Food and Non-Alcoholic Beverages”, “Transport” and “Communication”. Furthermore, by excluding the effect of food and energy, the core CPI grew by 2.8 percent (YOY). The 12-month average inflation rate was 3.6 percent in December 2018, compared to 3.2 percent in November 2018.

Government
Total government revenue amounted to Afl. 144.1 million in December 2018, Afl. 13.8 million less than the same month of the previous year. This outcome resulted from a decline in non-tax revenue (-Afl. 13.9 million), while tax revenue remained unchanged. The latter resulted mainly from an increase in income from turnover tax (+Afl. 9.3 million; introduction of the B.A.V.P as opposed to the same month in 2017), which was mainly offset by  decreases in income from land (-Afl. 3.9 million) and transfer taxes (-Afl. 3.5 million).