The Monetary Policy Committee (CPM) of the Central Bank of West African States (BCEAO) held, on Wednesday, June 9, 2021, its second ordinary meeting for the year 2021, by videoconference, under the presidency of Mr. Tiémoko Meyliet KONE, Governor of the Central Bank, its statutory President.
The Committee reviewed the main developments in the international and regional economic situation in the recent period, as well as the risk factors which may affect the medium-term outlook for inflation and economic growth in the Union.
Under international conditions, the Committee noted a pick-up in economic activity in the first quarter of 2021, following the global crisis in 2020 caused by the COVID-19 pandemic. Progress in vaccination campaigns as well as the continued implementation of budgetary and monetary support measures have strengthened market confidence and improved the economic outlook. According to the International Monetary Fund, the world economy will experience a strong recovery in 2021, with an expected growth rate of 6.0%, after a contraction of 3.5% in 2020.
On the international markets, commodity prices generally continued their upward trend for the third consecutive quarter, driven by the recovery in global demand and the persistence of certain constraints weighing on on offer. According to data from the World Bank, energy prices increased by 35.3% in the first quarter of 2021, after an 8.4% increase observed in the previous quarter. At the same time, the prices of non-energy commodities strengthened with an increase of 27.8%, following an increase of 11.8%. In this wake, the price index of non-energy raw materials exported by the WAEMU countries increased by 5.1% during the first quarter of 2021, after an increase of 2.7% a quarter earlier. . For its part, the price index of the main food products imported by the WAEMU countries grew by 19.4% during the first quarter of 2021, after an increase of 11.2% a quarter earlier.
Examining the internal situation, the Committee noted a strengthening of the recovery of economic activity in the WAEMU in the first quarter of 2021, with a real GDP growth rate of 3.2%, at an annual rate, after 1.8 % in the previous quarter. This development was driven by all sectors of activity, following the renewed vigor in domestic demand. In perspective, the Union’s growth rate is expected at 5.6% in 2021, after 1.5% in 2020. The consolidation of the upturn in economic activity in the Union would be driven by proper implementation of the stimulus plans, the maintenance of budgetary and monetary support measures as well as an improvement in the security situation.
The execution of the financial operations of the WAEMU member states, during the first three months of the year 2021, resulted, with reference to the same period of the previous year, in an attenuation of the overall budget deficit. , commitment basis, including grants, amounting to 2.9% of GDP against 4.5% a year earlier. This development is the result of an increase in income and grants greater than that of public expenditure.
In the money market, financial conditions remained favorable, in line with the accommodative stance of monetary policy led by the Central Bank. The weighted average auction rates on the one-week and one-month compartments of the central bank counters remained at 2.00% against respective levels of 2.90% and 3.55% at the same period of the last year. The weighted average one-week maturity interbank market interest rate fell to 2.53% from 2.62% in the previous quarter. In line with these developments, the average rate on bank loans fell by 16 basis points compared to the fourth quarter of 2020 to stand at 6.42% in the first quarter of 2021. On the government securities market, the conditions of funding from member states remained favorable over the period. The weighted average interest rate on Treasury bills stood at 3.6% from 4.5% a year earlier.
In monetary terms, the money supply accelerated in the first quarter of 2021, with annual growth of 21.5% against 16.5% a quarter earlier. This growth was driven by the combined increases in domestic claims and net foreign assets. In particular, claims on the economy grew 6.5% year on year. The Union’s foreign exchange reserves were consolidated compared to the previous quarter to represent a coverage rate of the monetary issue of 84.0% at the end of March 2021. They ensure 6.7 months of imports of goods and services. against 5.9 months in the previous quarter.
Despite global inflationary pressures, the Monetary Policy Committee noted a deceleration in consumer prices in the first quarter of 2021, with the inflation rate standing at 2.2% against 2.7% a quarter earlier. This drop in the rate of price growth in the sub-region is mainly attributable to the smaller increase in food prices, due to the improvement in the supply of cereals, vegetables as well as tubers and plantains. By the twenty-four month horizon, i.e. at the end of March 2023, the inflation rate should stand at 1.9%, within the target zone [1.0% – 3.0%] defined for monetary policy. in UMOA.
On the basis of these analyzes, the Monetary Policy Committee decided to maintain unchanged the minimum interest rate for submission to liquidity injection tender operations at 2.00% and the interest rate of marginal lending window at 4.00%, levels in effect since June 24, 2020. The minimum reserve ratio applicable to Union banks remains unchanged at 3.0%.
In the coming months, the BCEAO will continue to implement a monetary policy ensuring price stability, while supporting the return to strong growth.
