Economic activity has been strongly affected by the disruptions in the production, distribution and marketing chains, due to the Covid-19 pandemic. This was noted by the BCEAO Monetary Policy Committee (Cpm), during its second ordinary meeting for the year 2020 held on Monday June 22 by videoconference.

“Economic activity experienced a sharp slowdown during the first quarter of 2020 in UEMOA”, according to the Monetary Policy Committee (Cpm) of the Central Bank of West African States (Bceao). At the end of its second ordinary meeting for the year 2020, held last Monday, June 22 by videoconference due to Covid-19, it notes that the Gross Domestic Product (GDP) of the Union has increased, year-on-year, only 3.3%, after 6.5% a quarter earlier. “This deceleration in economic activity is mainly driven by the tertiary sector, whose contribution to growth fell by half compared to the previous quarter, thus reflecting the first impacts of the spread of the pandemic, particularly in the tourism sectors. , the hotel industry, transport and trade”, underlines the press release from the Bceao which reached our editorial staff.

The impacts of the pandemic are expected to be more pronounced during the second quarter of 2020 marked by the measures taken by States to limit the spread of the disease, in particular border closures and containment measures which have affected production chains, distribution and marketing. For the whole of 2020, the forecasts made by the Central Bank are counting on an economic growth rate for the West African Economic and Monetary Union (UEMOA) of 2.6% against an initial forecast of 6.6 %, announces Tiémoko Meyliet Koné, governor of the Bceao and statutory president of the Cpm.

The execution of budgets in the Member States of the Union was strongly affected, in the first quarter of 2020, by the fall in revenue and an increase in expenditure leading to a worsening of the budget deficit. Thus, the budget deficit, on a commitment basis, including grants, would stand at 922.1 billion or 4.5% of GDP at the end of March 2020 compared to 222.5 billion or 1.1% of GDP in the same period of the previous year, according to the BCEAO.

It is noted in the first quarter of 2020, a slight acceleration in the growth rate of the money supply, year-on-year, in connection with the rebound in net foreign assets as well as the increase in domestic claims. The Union's foreign exchange reserves strengthened on an annual basis, ensuring 6.3 months of imports of goods and services at the end of March 2020.

Inflation

The Cpm notes that the average quarterly interest rate for weekly liquidity injection calls for tenders has fallen significantly, standing at 2.69% against 2.98% in the last quarter of 2019. Since April 2020, informs the Central Bank, it has been at 2.50%, in connection with the injections of liquidity at the fixed rate of 2.50% that it launched to combat the harmful effects of the health crisis.

With regard to the inflation situation in the Union, the Committee notes that the general level of consumer prices increased during the first quarter of 2020. The inflation rate stood at 1.2% after -0 .6% a quarter earlier, due to the rebound in food prices. On the horizon of eight quarters, projects the Bceao, this rate would be 2.2%, year-on-year, in line with the objective of price stability that it is pursuing.

The members of the Cpm have decided to support the dynamics of the gradual recovery that should be driven by the recovery plans put in place by the States and the gradual easing of travel restrictions. As part of the restart of the productive apparatus, a 50 basis point cut is planned for the Central Bank's key rates. Thus, as of June 24, 2020, the minimum interest rate for bidding on liquidity injection call for tender operations is thus reduced from 2.50% to 2.00% and the counter interest rate marginal lending is reduced from 4.50% to 4.00%.

The reserve requirement coefficient applicable to banks in the Union, set at 3.0%, remains unchanged.