Bi-Weekly Report 9 - 22 October 2018


The fiscal deficit narrowed on a 12-month rolling basis for the first time in 5 months in September (to 2.0% of GDP)

A sharp external adjustment is underway, with the 12-month rolling current account deficit narrowing from a 6-year high of 7.2% of GDP in May to 6.5% in August



The banking sector's bottom line improved further in Q2:18, mainly due to a slowdown in provisioning

The banking system has strengthened significantly over the past few years; however, new vulnerabilities are emerging



Headline inflation rose to a 5½-year high of 3.6% y-o-y in September from 2.8% at end-2017, on the back of higher volatile food prices and stronger domestic demand

The real estate market maintained its momentum in Q2:18



Headline inflation declined to 2.1% y-o-y in September from 3.0% in December -- remaining within the NBS target range of 3±1.5%

NBS to initiate a new cycle of monetary policy tightening in H2:19



Parliament voted to amend the constitution, allowing the country to change its name -- a sine qua non condition for joining NATO and starting EU accession talks

Headline inflation declined to 1.5% y-o-y in September from a 5-year high of 2.4% at end-2017

Credit to the private sector reached a 2¼-year high of 7.7% y-o-y at end-Q3:18, due to higher supply and demand for loans



Headline inflation has embarked on a mild upward trend since the beginning of the year, albeit remaining at a relatively low 2.1% in September

The BoA is set to maintain its key rate on hold until the initiation of a new cycle of monetary policy tightening in Q3:19



Headline inflation reached a peak of 3.1% y-o-y in September, but is set to ease by end-year

The EC/ECB 5th Post-Programme Surveillance mission commended the country's significant progress on resolving NPLs



Headline inflation accelerated temporarily to 16.0% y-o-y at end-Q1:18/19 from 14.4% at end-Q4:17/18 due to a sharp rise in volatile prices of fruit & vegetables

The CBE is likely to remain in a "wait-and-see" mode until the ongoing emerging market volatility subsides

FX reserves reached a record high USD 44.5bn at end-Q1:18/19, supported by the solid implementation of the loan agreement with the IMF


Appendix: Financial Markets

Bi-Weekly Report 9 - 22 October 2018