The Reserve Bank expects these events to further derail economic recovery and GDP growth to contract again in FY2021-22. Inflation is projected to remain above the 5% reference throughout 2022, and will ease once the global disruptions subside and the aggressive monetary policy of advanced economies take effect. Foreign reserves will continue to increase and stay well above the minimum of 3 months of import cover due to the expected inflow of budget support, relief funds, aid, grants, and private remittances in response to the HTHH disaster. The stringent COVID-19 restrictions negatively impact business operations, employment, and income. Borrowers who were directly affected by the HTHH disaster and Covid-19 restrictions may also risk defaulting on their loans, however, the financial system is still sound supported by high liquidity and adequate capital.

The Reserve Bank is now projecting a contraction in GDP growth for FY2021/22, in contrast to its previous forecast of a slow recovery. Inflation is anticipated to remain above the 5% reference rate for the most of 2022. Foreign reserves will continue to increase and stay well above the minimum of 3 months of import cover due to the expected inflow of budget support, relief funds, aid, grants, and private remittances triggered by the HTHH disaster. The extended national lockdown have impacted businesses through reduced operating hours, and lower take home pay for employees from lost employment or fewer working hours, this may result in higher non-performing loans that could weaken the stability of the financial system. Nevertheless, the Reserve Bank maintains its accommodative monetary policy stance in support of economic recovery. At the same time, it remains vigilant in closely monitoring financial and economic developments, internally and externally, and regularly reviews its monetary policy settings continues to maintain the stability of the financial system.

The Reserve Bank expects a further downgrade of its GDP growth outlook for the current fiscal year 2021/22. Inflation rate is now expected to persistently exceed the 5% reference rate up to mid-2022. On the other hand, foreign reserves will still be comfortable above the minimum of 3 months of import cover. The stability of the banking system is expected to be maintained supported by banks' excess liquidity and capital positions. In this regard, the current monetary policy stance is considered appropriate at this time, leaving the excess liquidity in the banking system for more prudent lending in support of economic recovery, while maintaining financial stability. Nevertheless, the Reserve Bank remains vigilant in closely monitoring financial and economic developments, internal and external, and regularly reviews its monetary policy settings as needed for macroeconomic growth.

The Reserve Bank has downgraded its GDP outlook for the current fiscal year, given the uncertainty of the pandemic dynamics, the resurgence of highly contagious variants, ongoing supply disruptions, and rising inflation. However, it still expects foreign reserves to remain at comfortable levels above the minimum of 3 months of import cover, while transitory inflationary pressure above the 5% reference rate is expected in the near term. Inflation is forecasted to return below the 5% reference rate by early 2022, should the global markets stabilize as supported by the successful rollout of COVID-19 inoculation and bring down imported inflation. The stability of the banking system is still expected to be maintained supported by adequate profits and liquidity.

The global pandemic continues to impact economic development, both globally and domestically. The Reserve Bank still expects foreign reserves to remain at comfortable levels above the minimum of 3 months of import cover. Inflation is expected to remain above the 5% reference rate in the upcoming months. The projection is largely driven by the pressure from disruptions to supply chains, given the escalated transmission of COVID-19 new variants in major trading partners. Nevertheless, the inflation is forecasted to return below the 5% reference rate in early 2022, given the markets will stabilize as supported by the successful rollouts of COVID-19 inoculation. The banking system is still expected to remain sound despite subdued credit growth. The current monetary policy stance remains accommodative but the Reserve Bank will continue to monitor emerging risks prompted by uncertainties surrounding the pandemic, impacting economic growth, and potentially impairing financial stability. The Reserve Bank remains vigilant in its regulatory and supervisory roles to ensure that financial stability is maintained while supporting economic recovery.

While the evolution of COVID-19 continues to impact economic development, both globally and domestically, the Reserve Bank still expects foreign reserves to remain at comfortable levels above the minimum of 3 months of import cover. Inflation is forecasted to remain above the Reserve Bank’s reference rate of 5% in 2021 yet expected to fall below 5% in January 2022. The banking system is still expected to remain sound despite the slowdown in credit growth. The current monetary policy stance remains accommodative but the Reserve Bank will continue to monitor emerging risks prompted by uncertainties surrounding the COVID-19 pandemic, impacting economic growth, and potentially impairing financial stability. The Reserve Bank remains vigilant in its regulatory and supervisory roles to ensure that financial stability is maintained while supporting economic recovery.

On the outlook, foreign reserves is expected to remain at comfortable levels above the minimum of 3 months of import cover. Though inflation is forecasted to remain above the Reserve Bank’s reference rate of 5% in 2021, it is deemed transitory and is expected to fall below 5% in January 2022. The banking system is still expected to remain sound despite the slowdown in credit growth. Therefore, the Reserve Bank's monetary policy stance remains accommodative. The Reserve Bank will continue to monitor emerging risks prompted by uncertainties surrounding the COVID-19 pandemic, impacting economic growth and potentially impairing financial stability. The Reserve Bank remains vigilant in its regulatory and supervisory roles to ensure that financial stability is maintained while support economic recovery.

A more positive outlook is projected for the 2021/22 fiscal year as the global economy is expected to recover coupled with the successful vaccine rollouts. Although there is expected inflationary pressure, it is projected to be transitory and will eventually fall below the 5% reference rate in the next 6 months. Foreign reserves are at comfortable levels, and the financial system is stable. In that regard, the Reserve Bank's monetary policy stance remains accommodative. The Reserve Bank will monitor emerging risks prompted by uncertainties surrounding the COVID-19 pandemic, its impact on economic growth and financial stability. The Reserve Bank remains vigilant in its regulatory and supervisory roles to maintain financial stability while supporting economic recovery.

Domestic economic growth is anticipated to remain subdued. However, the Reserve Bank's monetary policy stance remains accommodative. The Reserve Bank will continue to monitor emerging risks prompted by uncertainties surrounding the COVID-19 pandemic, impacting economic growth and potentially impairing financial stability. The Reserve Bank remains vigilant in its regulatory and supervisory roles to ensure that financial stability is maintained while mitigating the economic downturn and support recovery.

Domestic economic growth is anticipated to remain subdued. However, the Reserve Bank's monetary policy stance remains accommodative. The Reserve Bank will continue to monitor emerging risks prompted by uncertainties surrounding the COVID-19 pandemic, impacting economic growth and potentially impairing financial stability. The Reserve Bank remains vigilant in its regulatory and supervisory roles to ensure that financial stability is maintained while mitigating the economic downturn and support recovery.