The Central Bank’s latest forecasts now point to the economy recovering much slower than original expectations, with our real GDP growth rate struggling to make it past 1 percent. This is way down from the 3.0 percent growth anticipated in the Bank’s earlier forecasts. The recent IMF Article IV Mission has suggested that the economy may even decline further, by up to (negative) 3 percent in 2009/10, due mainly to the severe impact of the tsunami on the tourism sector. Our balance of payments, however, is expected to be in substantial surplus resulting in the level of our foreign exchange reserves being sufficient to still cover in excess of 7 months of imports. At the same time, our inflation rate is expected to decline further and is likely to remain close to zero for the remainder of the current financial year, on the back of lower global food and commodity prices as well as the recovery of domestic food supplies. Reflecting the relatively weak state of the economy, the Central Bank’s Board decided at its Meeting last month, for monetary policy to remain eased to help stimulate the economy. The current deflationary trend and the substantial level of international reserves have made it feasible for the Bank to pursue this monetary policy stance. In the remaining months of 2009/10, therefore, the Central Bank will aim at maintaining a substantial amount of free liquidity in the financial system, to drive down market interest rates further.
But, I caution you, this is only the first step in your careers as Accountants. Remember, “it is not what you learned, but how you use what you learned, that counts”. I came across a definition of an Accountant the other day. It said, “an accountant is someone who solves a problem that you did not know you had, in a way that you don’t understand”! BIS Review 49/2010  1  I hope that tonight’s Graduates do not end up being one of these Accountants, who creates a problem first and then pretends to solve it. And, worse still, they end up charging the client for something that was not there in the first place! It’s almost like being a lawyer! The recent global financial crisis started from a liquidity shortfall in the United States. This liquidity shortfall resulted from many loans (especially for housing) going into default, and there were insufficient assets to cover these loans. As a result, many large banks and financial institutions went bankrupt. And, if it were not for the quick and substantial intervention by some major Governments and Central Banks, the global economy would have collapsed. Among others, the Accountants have been blamed for the “financial crisis”, as a result of their “creative accounting” techniques, which contributed to inflating the values of the assets which were used as collateral for the many risky loans that were issued.