Lesotho’s improved economic activity during the third quarter of 2023 has been attributed to the construction, services and transport sectors by the Central Bank of Lesotho (CBL).
Speaking on the Monetary Committee Policy (MPC) decisions last week, CBL governor Dr Maluke Letete said the rebound was due to a pickup in demand as well as improved performance in the three sectors.
“Domestic economic activity rebounded in the third quarter of 2023. The rebound was due to a pickup in demand as well as improved performance in construction and services, particularly transport,” Dr Letete said.
“Nonetheless, the persistently weak manufacturing sector moderated growth. The LHWP Phase II project and its knock-on effects on the services sector are expected to underpin growth in the medium term.”
He also indicated that domestic inflation increased to 6.5 percent in October 2023 from 5.8 percent in September 2023.
“Food and energy prices coupled with weak exchange rates were the main contributors to the rise in inflation. The continued weaker loti, volatile crude oil prices, and administered prices as the risk of El Nino present upside risks to the medium-term inflation outlook,” Letete said.
Letete further noted that the broad money supply increased in the third quarter of 2023.
“This growth was supported by the increase in net foreign assets and net domestic assets. The increase in both NFA and NDA was mainly driven by the redemption of government securities and credit extension by commercial banks. The rise in private sector credit was observed in both credit to households and business enterprises.”
He said the current account deficit narrowed to 1.4 percent of GDP in the third quarter from 2.3 percent of GDP in the second quarter of 2023, due to increased surpluses in both primary and secondary income accounts.
“In summary, global economic prospects for 2023 remained resilient despite the slowdown from 2022. Nonetheless, risks to the downside may threaten further recovery. The domestic economic activity rebounded in the third quarter of 2023 and is projected to improve in the medium-term, despite the continued weaknesses in the manufacturing sector. Inflation rose and risks are tilted to the upside due to weak loti and prospects of adverse weather in the near-term.”
On the policy decisions, the apex bank has maintained the CBL rate at 7.75 percent, and the target floor for the net international reserves at US$710 million.
“The committee has decided to leave the Net International Reserves (NIR) target floor unchanged at US$710 million. At this level, the NIR target will be sufficient to maintain a one-to-one exchange rate peg between the Loti and the Rand. And also, to leave the CBL rate unchanged at 7.75 percent per annum,” Letete explained.