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QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE OF CONTENTS REFERENCE STATISTICAL ANNEX TECHNICAL NOTES 1.0 EXECUTIVE SUMMARY PAGE NO 2 5 8 9-10 2.0 THE INTERNATIONAL ECONOMY 11 3.0 DOMESTIC ECONOMIC DEVELOPMENTS 3.1 REAL ECONOMY 3.2 FISCAL OPERATIONS 3.3 MONETARY DEVELOPMENTS 3.4 MONEY MARKET DEVELOPMENTS 3.5 BANKING SECTOR DEVELOPMENTS 3.6 BALANCE OF PAYMENTS 3.7 EXCHANGE RATE DEVELOPMENTS CHRONOLOGY OF MAJOR EVENTS ANNEX TABLES 17 17 21 24 28 29 34 35 37 38-90 1 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 REFERENCE The following articles have appeared in previous Quarterly Reports since 1987.
Issue Title Q4 December 1986 The System of National Accounts of the Republic of Vanuatu: Data Sources, Methodology, and Assumptions Q1 March 1987 Press Announcement from Minister of Finance concerning The Cyclone UMA – Economic recovery program (A) Duty Exemptions on replacement materials & equipment (B) Duty Exemptions on New Projects Insurance settlements / Loss adjustment disputes Future cyclone insurance cover in Vanuatu Banking Loans for reconstruction Business License fees 1988 Q3 September 1988 Budget of the Government of Vanuatu for 1989 Q3 September 1988 Vanuatu National Provident Fund: First year of operations Q1 March 2000 The Reserve Bank’s Exchange Rate Policy Q2 June 2000 Money Laundering Q3 September 2000 Governor’s Speech on the Exhibition of the “Mani Blong Yumi” Money in Vanuatu Society Q3 September 2000 Notice to Commercial Banks concerning Money Laundering Q4 December 2000 Money is Lubricant of the economy Q4 December 2000 Capital Adequacy Q1 March 2001 Update on Basel Capital Adequacy Reform Proposals Q2 June 2001 Capital Adequacy Q3 September 2003 International Banks – Overview of Developments Q4 December 2003 Monetary Policy Statement by the Governor Q1 March 2004 International Banking Act No.
4 Q1 March 2004 The Association of Financial Supervisors of Pacific Countries in collaboration with PFTAC Q2 June 2004 Governor’s Speech for Education Economics Workshop Q2 June 2004 Governor’s Speech for Media Freedom Day Q2 June 2004 Press Release on Biri Group 2 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Q3 September 2004 Bank Supervision Policy Guideline 3, Supervision of the Adequacy of Liquidity of Banks Q3 September 2004 Reserve Bank Undertakes Major Review Q4 December 2004 Governor’s speech on overcoming Vanuatu’s economic challenges, 2004 business forum Q4 December 2004 Governor’s speech for the association of financial supervisors of the Pacific countries meeting Q4 December 2004 The formulation of monetary policy in Vanuatu Q4 December 2004 What are Reserve Bank notes Q4 December 2004 Excess reserves Q1 March 2005 Challenges to the Monetary Policy: The case of Vanuatu presented to the regional seminar on Monetary Policy implementation Q1 March 2005 Summary of Business Survey March 2005 Q1 March 2005 Monetary Policy Instruments – The case for Vanuatu Q1 March 2005 What is the Balance of Payments?
How it is compiled in Vanuatu Q1 March 2006 Factors determining Vanuatu imports – A brief analysis Q1 March 2006 International Banking Act No.
4 of 2002 Q2 June 2006 Bekoz Bank Limited Q1 March 2007 Reserve Bank Issues Domestic Banking License to Bred Bank Q3 September 2007 Reserve Bank Issues Domestic Business License to operate as a credit institution to Credit Corporation (Vanuatu) Ltd Q4 December 2007 International Banking Act No.4 of 2002 Q4 December 2007 Reserve Bank Issues International Banking Business License to Financial Partners Bank Q3 September 2008 Reserve Bank raises Rediscount Rate Q4 December 2008 Insurance Amendment Act No.
29 of 2009 Turbulance in Global Financial Markets Relaxation of Reserve Bank’s Monetary Policy and Prudential Instruments Q1 June 2009 Monetary Policy Statement by Governor Mani Blong Yumi – Money in Vanuatu Society Q3 September 2009 Monetary Policy Statement by Governor Q1 March 2010 Task & Functions of the Reserve Bank Q2 June 2010 Monetary Policy Statement by the Governor 3 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Q3 September 2010 Monetary Policy Statement by the Governor Q1 March 2011 Monetary Policy Statement by the Governor Q2 June 2011 Reserve Bank holds Economic Symposium Q2 June 2011 30 Years of Central Banking in Vanuatu Q3 September 2011 Monetary Policy Statement by the Governor 4 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 STATISTICAL ANNEX TABLE NO.
I Monetary Conditions (Tables 1 - 21) 1 Assets of the Reserve Bank of Vanuatu PAGE NO.
Liabilities of the Reserve Bank of Vanuatu Assets of Commercial Banks Liabilities of Commercial Banks Monetary Survey: A Consolidated Statement of Accounts of the Monetary Institutions Domestic Money Supply and Components Distribution of Vatu and Foreign Currency Deposits of Residents by Categories 8 Time Deposits in Vatu of Residents with Commercial Banks by Maturity Period 9 Commercial Banks' Sectoral Distribution of Loans and Advances in Vatu and Foreign Currency 10 Distribution of Vatu Advances by Interest Rates as at end of March 2011 11 Selected Interest Rates for Local Commercial Banks 12 Denominations of Currency on Issue 13 Net Official Reserves 14 Reserve Bank Notes Issued in Primary Market 15 Commercial Banks Liquidity 16 Commercial Domestic Banks Consolidated Capital 17 International Banks Balance Sheet (a) 18 International Banks Balance Sheet (b) 19 Domestic Banking Industry Foreign Exchange Turnover 20 21 Domestic Banking Industry Core set of Financial Soundness Indicators Domestic Banking Industry – Profit (Vatu ‘000) 5 38 39 40 41 42 44 45 46 47 48 49 50 51 52 53 54 56 58 61 62 63 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 II Government Finance (Tables 22 - 25) 22 Vanuatu Government Fiscal Operations 23 Government Revenue Classified By Major Sources 24 Government Expenditure Classified by Major Category 25 Vanuatu Government Bonds Outstanding II External Sector (Tables 26 - 30) 26 Exchange Rates: Vatu per Unit of Foreign Currencies 27 Summary of Balance of Payments 28 International
 Investment Position 29 Exports 30 Imports 31 Exports by country of consignment 32 Imports by country of consignment IV.
Finance Centre (Tables 31 - 33) 33 Company Registration in Vanuatu 34 Shipping Registration 35 Finance Center Institutions: Local Expenditure, Value-Added, Employment and Total Assets V. Real Sector (Tables 34 - 44) 36 Visitor Arrivals 37 Visitor Arrivals by Country of Origin / Hotel Occupancy Rates 38 Consumer Price Indices (Relative to the previous quarter) 39 Consumer Price Indices (Relative to the same quarter in the previous year) 40 Consumer Price Indices by Region (Relative to the previous quarter) 41 Consumer Price Indices by Region (Relative to the same quarter in the previous year) 42 Cattle Slaughter by Abattoirs 6 64 65 66 67 68 69 71 73 74 75 76 77 78 79 80 81 82 83 84 85 86 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 43 Energy Consumption 44 Postal Services 45 Motor Vehicle Registration – Port Vila and Luganville 46 Number of Provident Fund contributing members/full employment 87 88 89 90 7 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TECHNICAL NOTES Statistical data in the Quarterly Economic Review are based on the latest available information, and several statistical tables are substantially up-dated and amended from time to time to reflect figures revised by respective sources.
Abbreviations used are: = = = e n.a.

E n.e.i.

= p - r .. R = = = = = Estimated Not yet available Estimated by Source Not elsewhere included Provisional Nil Revised Negligible/Almost Revised by Source 8 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 1.0 EXECUTIVE SUMMARY The fourth quarter of 2011 saw further worsening of the global economic outlook with continued uncertainty remaining over eurozone’s sovereign debt problems, while fiscal consolidation and bank deleveraging weighed on growth.
Emerging markets and advanced economies alike continued to face slower external demand combined with a drying up of capital flows stemming from problems in the eurozone.

This has led to the IMF making a second round of downward revisions to their world growth forecasts.
In response to this slowdown in global activity a number of central banks have provided monetary stimulus to encourage lending and prop up growth, including significant interventions by the European Central Bank (ECB) to increase long term lending to commercial banks.

In Vanuatu, domestic indicators continued to show weakening in the economy’s performance over the quarter due largely to falls in key commodity prices.
Export shipments saw a decline over the last three months of 2011, while tourism arrivals fell due to a weaker month for tourism in October.

Despite this, the domestic economy is expected to have grown over the quarter due to an expansion in previously delayed private sector led construction.

It is estimated that the Vanuatu economy will grow by 4.3 percent in 2011 but the latest revision has dropped growth to 3.6 percent due to some public sector projects being withheld.
The Government’s fiscal deficit increased in the three months to December 2011, driven by a decrease in total revenue and grants, outweighing falls in total expenditure.

Similar to the September quarter, the reduction in expenditure, which also fell compared to the same period in 2010, resulted from falls in development spending.
Tax revenue, making up the majority of recurrent revenue, decreased over the quarter driven mainly by falls in VAT collection, however turnover tax, revenue from business licences, excise duty and property taxes also saw declines over the review period.

Similar to the previous quarters, broad money supply increased over the fourth quarter.
This increase was driven by growth in domestic credit, which outweighed changes in net foreign assets (NFA) that saw a return to the previous trend of declining commercial banks NFA holdings.

Reserve money saw moderate growth, with increases in currency in circulation outweighing decline in the excess reserves of commercial banks.

This decline in excess reserves to a level close to the RBVs target was driven in part by an increase in outstanding RBV notes over the quarter.
Over the period, the yields on 91-day and 62-day Notes showed considerable increases following the increases also observed over the September quarter.

During the last quarter of the year, local expenditure of financial institutions showed significant increases, driven in the main by growth in capital and recurrent these expenditures.

However assets owned by institutions showed modest declines over the quarter but remained flat over the year.
In other sectors, shipping fees showed another quarter of decline despite an increase in registered ships, while the total number of companies registered showed an increase over the quarter and over the year.

The provisional balance of payments for the December quarter 2011 recorded a surplus driven by movements in official foreign exchange reserves at the end of the quarter.

The current account deficit increased with significant declines in the net services and net current transfer accounts.
The capital account recorded an increase over the quarter due to a rise in funds for long term government projects by major donors.

By the end of December foreign exchange reserves in terms of months of import cover fell to 6.8 months, however this still remains well above the Bank’s minimum threshold.
SYNTHÈSE la dette souveraine, Le quatrième trimestre de 2011 a vu en outre l'aggravation de la situation économique mondiale avec l'incertitude persistante qui reste sur la zone euro tandis que problèmes de l'assainissement budgétaire et le désendettement bancaire a pesé sur la croissance.
Les marchés émergents et les économies avancées semblables ont continué à faire face à ralentissement de la demande externe combiné à un tarissement des flux de capitaux découlant de problèmes de liquidité dans la zone euro.

Cela a conduit à faire du FMI une deuxième série de révisions à la baisse leurs prévisions de croissance du monde.
En réponse à ce ralentissement de l'activité mondiale un certain nombre de banques centrales ont fourni des mesures de stimulation monétaire pour encourager les prêts et soutenir la croissance, y compris les interventions importantes de la Banque centrale européenne (BCE) d'augmenter dans les prêts à long terme aux banques commerciales.
Au Vanuatu, les indicateurs nationaux ont continué à montrer un peu d'un affaiblissement de la performance de l'économie au cours du trimestre s'explique en 9 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 grande partie à la chute des prix des matières premières clés.

Expéditions à l'exportation ont connu une baisse au cours des trois derniers mois de 2011, tandis que les arrivées touristiques a diminué en raison d'un mois plus faible pour le tourisme en Octobre.
Malgré cela, l'économie domestique est la croissance devrait avoir augmenté au cours du trimestre due à une expansion dans la construction du secteur privé dirigé précédemment retardé.

Au cours de 2011, il est estimé que l'économie de Vanuatu a augmenté de 4,3 pour cent, passant d'environ 2,2 pour cent en 2010.
Le déficit budgétaire du gouvernement a augmenté dans les trois mois à Décembre 2011, entraînée par une diminution des recettes totales et dons, l'emportant sur les chutes dans les dépenses totales vu au cours du trimestre.

Comme au trimestre Septembre, la réduction des dépenses, qui est également baissé par rapport à la même période en 2010, a entraîné des chutes dans les dépenses de développement.
Les recettes fiscales, qui constituent la majorité des revenus récurrents, a diminué au cours du trimestre tirée principalement par des baisses de collecte de la TVA, l'impôt sur le chiffre d'affaires toutefois, les recettes provenant des licences d'affaires, droits d'accises et des taxes foncières a également enregistré des baisses au cours de la période d'examen.
secteurs, frais de port a montré un autre quart de la baisse malgré une hausse de navires immatriculés, tandis que le nombre total des entreprises enregistrées ont montré une augmentation sur le trimestre et au cours de l'année.

Le bilan provisoire des paiements pour le trimestre Décembre 2011 a enregistré un excédent entraîné par les mouvements des réserves officielles de change à la fin du trimestre.
Le déficit du compte courant a augmenté avec des baisses importantes dans les services de net et les comptes de transfert actuels.

Dans les transferts de dépôts des sociétés.

Le compte de capital a enregistré une hausse au cours du trimestre en raison d'une hausse des fonds pour des projets à long terme du gouvernement par les principaux donateurs.
À la fin des réserves de change de décembre étranger en termes de mois de couverture des importations ont chuté, mais cela reste encore bien au dessus du seuil minimal de la Banque à 6,8 mois.

À l'instar des trimestres précédents, l'approvisionnement en monnaie au sens large a augmenté au cours du quatrième trimestre.
Cette augmentation a été stimulée par la croissance du crédit intérieur, qui l’emportait sur les changements dans les avoirs extérieurs nets (NFA) qui ont vu un retour à la tendance précédente de la baisse des exploitations banques commerciales NFA.

Monnaie de réserve a connu une croissance modérée, avec des augmentations dans la monnaie dans la circulation baisse réserves l'emporte excédentaires des banques commerciales.
Cette baisse des réserves excédentaires à un niveau proche de la cible de la RBV, a été entraînée en partie par une augmentation dans les notes RBV en circulation au cours du trimestre.

Au cours de la période, les rendements sur les billets de 91 jours et 62 jours ont montré des augmentations considérables à la suite des hausses observées aussi sur le trimestre Septembre.
sur les Au cours du dernier trimestre de l'année, les dépenses locales des institutions financières ont connu des augmentations importantes, chassés pour l'essentiel par la croissance du capital et les dépenses récurrentes.

Cependant actifs détenus par ces institutions ont enregistré des baisses modestes au cours du trimestre, mais est resté stable au cours de l'année.
Dans d'autres 10 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 2.0 THE INTERNATIONAL ECONOMY The US During the last three months of 2011, the problems of rising sovereign yields, fiscal consolidation and bank deleveraging in the euro zone worsened and continued to drag on the world economy.
Emerging markets and advanced economies alike faced growing problems of slowing external demand and a drying up of capital flows, which weighed on economic growth in comparison to relatively robust figures posted in the third quarter of 2011.

In response, in the three months to December, monetary authorities around the world have taken significant steps in loosening monetary policy to help stimulate growth and ease liquidity problems.
As a result of these growing problems, the IMF’s January update to the World Economic Outlook contained significant revisions to growth forecasts following downward revisions previously made in September.

World GDP growth forecasts for 2012 were revised down from a previously estimated 4.0 percent to 3.3 percent, while 2013 growth has been reduced from 4.5 percent to 3.9 percent.

Both advanced and emerging economies are now forecast to grow slower than previously expected.
The IMF expects advanced economies to grow 1.2 percent in 2012 and 1.9 percent in 2013, while emerging and developing economies are now forecast to grow by 5.4 percent in 2012 and 5.9 percent in 2013.

Figure 1: World GDP Growth (Percentage Change; Annual Data) Over the fourth quarter, the US economy was estimated to have expanded at an annualised rate of 2.8 percent, the fastest rate since the second quarter of 2010.

This compares to an increase in the third quarter of 1.8 percent.
However there is reason for caution over the sustainability of these relatively impressive growth figures given that the rebuilding of inventories contributed 1.94 percentage private points to the fourth-quarter change in real GDP.

Weighing against these positive contributions were falls in federal government spending and state/local government spending, while imports also increased.

is the in December 2010.


This Headline consumer inflation at the end of the quarter was 3.0 percent year-on-year, compared to 3.9 percent at the end of the September quarter, and 1.5 percent largest December-December increase since 2007.

The energy index and index for food increased 6.6 percent and 4.7 percent respectively in 2011.

The index for all items less food and energy increased by 2.2 percent compared to a 0.8 percent increase in the year to December 2010.
Unemployment remained high but showed signs of improvement in the December quarter falling to 8.5 percent from 9.1 percent in September.

This is the lowest rate since the first quarter of 2009 Figure 2: US GDP and CPI (Percentage Change; Annual Data) 11 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Asia the quarter, Asian economies began Over to experience the impacts of a slowdown of key trading partners, placing downward pressure on economic growth.
The IMF therefore revised down their forecasts for developing Asian GDP growth from 8.0 to 7.3 percent in 2012, while the 2013 projection has been reduced from 8.4 percent to 7.8 percent.

Despite these revisions, developing Asia remains the region expected to grow most rapidly in 2012 and 2013.

Over December quarter the Chinese economy continued to slow as expected.
Quarter-on-quarter GDP growth fell to 2.0 percent compared to 2.3 percent over the previous quarter, while year-on-year GDP growth decreased to 8.9 percent from 9.1 percent.

A number of indicators, including December’s subdued import figures, point to a further slowing of the economy into 2012.

Inflation at the end of the quarter slowed to for the fifth straight month 4.1 percent compared to 6.1 percent in September.
This is the slowest rate in 14 months and is expected to give sufficient space for monetary stimulus in 2012.

Singapore’s economy contracted during the fourth quarter of 2011 by a seasonally adjust annualized 2.5 percent, while growth on a year-on-year basis remained positive at 3.6 percent.

This compares to 2.0 percent and 6.0 percent respectively in the September quarter.

A contraction in manufacturing was driving this expansion by an annualized rate of 11 percent from the previous quarter.
South Korean growth slowed to 0.4 percent during the quarter compared to 0.8 percent during the previous period.

This is the slowest growth rate in close to two years.

Japan The Japanese economic growth shrank by 0.6 percent over the last three months of 2011 after a brief rebound in the September quarter to 1.7 percent quarter-on-quarter.

The growth in September followed three previous quarters of contraction.
It is likely that this deterioration is driven by the 11 March earthquake and tsunami in Japan and the disruptions of the supply chain with production damage following flooding in Thailand, a strong Yen and continued weakening of overseas demand for exports.

the Japanese economy experienced another period of deflation with the inflation rate falling back to -0.2 percent from 0.0 percent during the previous quarter.

Core inflation (all items less food, alcohol and energy) was -1.1 percent.
In December Europe the region’s cutting back increase, banks sovereign debt crisis The euro area economy contracted in the fourth quarter remained as unresolved with yields on government bonds continuing to lending and governments implementing fiscal consolidation plans.

During the quarter, euro area GDP was down 0.3 percent, compared to 0.1 percent growth in the previous quarter.

Year-on-year growth also slowed further to 0.7 percent from 1.3 percent recorded in the third quarter.
Over the quarter, the German economy contracted 0.2 percent compared to 0.6 percent growth during the previous three months, while the French economy expanded 0.2 percent over the December quarter following a 0.3 percent growth.

Headline annual consumer inflation fell to 2.7 percent in the December quarter from 3.0 percent at the end of the September quarter.

All items excluding energy, food alcohol and tobacco increased 1.6 percent over the year.
During the quarter, unemployment in the eurozone reached 10.4 percent compared to 10.1 percent at the end of the September quarter.

This is the highest rate in the history of the eurozone.

Figure 3: Euro area GDP and CPI (Percentage Change; Annual Data) Australia 12 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Over the review period, the Australian economy began to further feel the flow-on effects of the slowdown of key trading partners.
Over the three months of 2011 GDP growth was less than expected at 0.8 percent resulting in growth over the year of 2.3 percent.

Unemployment was down slightly to 5.2 percent at the end of the review period compared 5.3 percent in September.

The consumer price index was flat in the December quarter compared to 0.6 percent in the previous quarter.

Over the year the rate of inflation fell to 3.1 percent compared to 3.5 percent recorded in the September quarter.
Figure 4: Australia GDP and CPI (Percentage Change; Annual Data) compared to 4.6 percent recorded in the September quarter, reflecting the fact that the latest annual increase does not include most of the effects of the October 2010 increase in goods and services tax (GST).

Unemployment in the December quarter fell from a seasonally adjusted 6.6 percent to 6.3 percent reflecting a sharp rise is part time employment.
Figure 5: New Zealand GDP and CPI (Percentage Change; Annual Data) New Zealand In the third quarter of 2011 New Zealand posted its strongest performance in nearly two years.

GDP growth increased to 0.8 percent, bringing GDP growth over the year to 1.3 percent.

This compares to 0.1 percent growth in the June quarter.
Over the quarter manufacturing was the largest contributor, up 2.3 percent, while retail, accommodation, and restaurants saw their largest quarterly increase since March 2007 up 2.5 percent thanks in part to the Rugby World Cup.

This weighed against a fall in construction down by 2.2 percent, its lowest quarterly level since June 2002 quarter.

To the surprise of analysts the consumer price index in the December quarter fell by 0.3 percent, compared to 0.4 percent increase over the previous quarter.
Over the year to December 2011 CPI increased 1.8 percent Market Developments The graph below shows the pattern for short term interest rates for some of the world economies most relevant to Vanuatu.

The rate shown in each case is a 3-month or 91-day money market rate.

Figure 6: Nominal Short-Term Interest Rates (Percentage Change; Monthly Data) The largest falls in short-term interest rates were recorded for Australia and the euro area.
In both 13 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 regions this likely reflects the monetary easing that was implemented by authorities in response to the global slowdown.

Figure 8: Stock Markets (Indices; January 2003=100) Long Term Interest Rates The graph below shows the pattern for 10-year government bond yields for some of the world economies most relevant to Vanuatu.
Figure 7: Nominal Long-Term Interest Rates (Percentage Growth; Monthly Data) Similar to short-term yields, long-term bond yields decreased in all four economies during the September quarter.

The largest decreases were recorded in New Zealand and Australia where rates fell by 0.5 percentage points and 0.4 percentage points respectively.

Declines in long-term interest rates were recorded for the euro area and the United States.
Stock Markets The following graph shows the movements in share indices from some of the world’s largest markets.

All four stock market indices recorded increases over the December quarter.

The largest increase was recorded by S&P 500 which was up 11 percent over the quarter but remained flat over the year to December 2011.

The FTSE 100 was up 9.0 percent over the quarter but remained down 5.4 percent over the year.

This was followed by ASX 200 and the NZ 50.


Oil Markets The average oil price over the December quarter stayed flat at US$103.18 per barrel, as compared to US$103.06 in the June quarter.

Oil prices are believed to have held up thanks to supply developments, with the IMF believing that despite the slowdown in global activity, oil prices will ease only marginally over 2012 thanks to elevated geopolitical risks.
The average price in December was US$104.26 14 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Figure 9: Average Spot Price for Crude Oil (US$/Barrel) Key Interest Rates Of the central banks included in Table 1, all loosened monetary policy or maintained a loose monetary policy stance in the face of the global slowdown.
The quarter saw significant intervention from central banks including a coordinated effort to enhance liquidity support to the financial system through lowering pricing on US dollar liquidity swap arrangements.

The US Federal Reserve reiterated its expectation that an exceptionally stance maintaining a target range for the federal funds rate at 0 to 0.25 was likely to be appropriate until at least loose monetary policy Table 1: Key Interest Rates (Percent; End of Period) 2014.
This was deemed necessary given the depressed housing sectors, elevated unemployment and risks in the global economy.

With the slowdown in the eurozone economy and liquidity problems in the banking sector the European Central Bank (ECB) decided to cut policy interest rates in November by 0.25 percentage points to 1.25 percent and again in November to 1.0 percent.

Alongside these cuts were a series of measures designed to ease liquidity in the banking sector.
This included offering three-year Long-Term Refinancing Operation (LTFO), widening the pool of assets the ECB accepts as collateral and reducing the reserve ratio from 2 to 1 percent.

The Reserve Bank of Australia (RBA) cut interest rates twice during the quarter to 4.25 percent.

RBA cited moderate GDP growth resulting from the global slowdown and the fall in commodity prices, combined with an easing of price growth, which provided the necessary room for monetary policy stimulus.
The Reserve Bank of New Zealand (RBNZ) cited concerns over the European sovereign debt crisis which is expected to cause a further slowing in global activity, putting downward pressure on New Zealand’s commodity export prices.

As a result interest rates increases are not expected until the extent of the European troubles are known.

RBNZ’s loose monetary policy stance was therefore held with rates remaining at 2.5 percent.
US Fed Funds Rate Euro Refi Rate Australian Cash Rate New Zealand Cash Rate Vanuatu Rediscount Rate 2009 Q4 2010 Q1 Q2 Q3 Q4 0.25 0.25 0.25 0.25 0.25 1.00 1.00 1.00 1.00 1.00 3.75 4.00 4.50 4.50 4.75 2.50 2.50 2.75 3.00 3.00 2011 Q1 Q2 Q3 Q4 1.00 1.25 1.50 1.00 Sources: US Federal Reserve, European Central Bank, Reserve Bank of Australia, Reserve Bank of New Zealand and Reserve Bank of Vanuatu 0.25 0.25 0.25 0.25 2.50 2.50 2.50 2.50 4.75 4.75 4.75 4.25 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 15 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Box A: Changes in Vanuatu’s Net Foreign Assets (NFA) The banking system’s net foreign assets (NFA) have seen some marked changes over recent years, with the NFA position of Vanuatu’s commercial banks worsening by 54 percent in 2010 and 27 percent in 2011.
This has direct implications for the money supply, weighing on M2 and can have implications for official foreign exchange the reserves, particularly downward trend puts significant pressure on commercial bank’s own reserve holdings necessitating greater reliance on RBV.

Figure 1: Net Foreign Assets; VT Millions foreign if What are the key trends in Vanuatu’s NFA?

Figure 1 shows the stark downward trend of the banking system’s NFA since July 2008.
However, it is quite clear that these changes are driven in the most part by the position of the commercial banks.

The NFA of the Reserve Bank of Vanuatu has broadly increased since 2006 at a moderate pace, while the commercial banks NFA have decreased substantially, albeit with a moderation in the decline over recent months.
Since June 2010 the NFA position of the banks has been weaker than that of the RBV, while it was observed that in December 2011 foreign assets of commercial banks fell below that of the RBV for first time.

Given that commercial banks are driving this decline in NFA, Figure 2 breaks down the decline in commercial bank NFA between assets and liabilities.
It can be clearly seen that the assets side of commercial bank’s balance sheets are dictating the downward NFA trend, however in 2010 and 2011 there were some increases in liabilities that also contributed to the decline in NFA but to a lesser extent.

Therefore, this information suggests that the foreign reserves of commercial banks have declined substantially since the second half of 2008.
Foreign Assets and the Link to Foreign Currency Time Deposits Figure 2: Commercial Banks Foreign Assets, Foreign Liabilities and Foreign Currency Time Deposits; VT Millions Figure 2 also presents foreign currency time deposits which constitute a significant proportion of deposits held within banks in Vanuatu.

It can be clearly seen that this shows a similar trend to the decline in foreign assets, in some instances leading the movements of foreign assets.
This observation provides tentative evidence for the assertion made by the IMF1 that Vanuatu’s NFA declines lay in the withdrawal of foreign currency deposits, in particular time deposits, with commercial banks forced to draw down foreign assets to pay for this.

The limited contribution of foreign liabilities to this downward movement, suggests that borrowing from abroad for lending purposes – suggested by some as a key driver of NFA decline - is likely to be less of a substantial cause.
The Reserve Bank of Vanuatu is currently undertaking in-house analysis of the drivers and impact of the changes in NFA.
1 Vanuatu’s 2011: Article IV Consultation 16 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 3.0 DOMESTIC ECONOMIC DEVELOPMENTS 3.1 REAL ECONOMY to show some The domestic economy continued weakening trends in the last quarter of the year primarily due to weakening commodity prices, however the Vanuatu government’s decision, through the Vanuatu Commodities Marketing Board (VCMB), to subsidize domestic copra prices is likely to have supported the copra industry in the quarter.
Export shipments of major commodities declined in the quarter, resulting in only modest growth observed over the year.

Tourism also weakened resulting from a weaker month for tourism in October.

Overall, the domestic economy appears to have shown modest grown over the December quarter, supported by private sector led-construction which had previously been delayed in the first half of the year.
The domestic economy is projected to have grown at 4.3 percent in 2011 from an estimated 2.2 percent in 2010, and a further 4.6 percent and 5.1 percent is projected for 2012 and 2013, respectively.

Partial indicators of domestic consumption suggest that domestic demand showed small improvements from the previous quarter.
The main indicators, including annual growth in Value Added Tax (VAT) collections, private sector lending and imports for home consumption improved slightly with the latter showing a decline partially as a result of falling commodity prices.
Inflation picked up slightly in the quarter with the year- on-year inflation rate for the December quarter increasing 0.2 percentage points to 1.2 percent, still comfortably well within the Reserve Bank of Vanuatu’s target annualized inflation range of 0-4 percent, with projected inflation also expected to remain within these bounds.
Copra and Coconut Oil In the December quarter of 2011, the level of copra production was estimated to have increased from the previous quarter to 11,291 tons, causing the value of production to increase to an estimated VT517 million.

This was compared to a revised estimate of 8,238 tons valued at VT398 million in the September quarter.
Due to declining world prices, the Vanuatu government through the VCMB introduced a subsidy of VT3,000 per kg on copra prices, bringing prices to around VT46,000 per ton by December 2011.

This has helped provide some stimulus for copra production, amidst declining global commodity prices.

Producer prices fell 5 percent in the quarter and 1 percent over the same quarter of 2010.
In the three months to December, copra exports fell to 2,269 tons valued at VT169 million down from 3,033 tons in the previous quarter and 5,605 tons in December 2010.

This is a considerable drop from the same period of 2010, clearly showing the impact of falling commodity prices on production.
In the quarter, the significant drop in copra exports brought its share of to 11 percent (compared to 13 percent in the previous quarter), making it the third highest contributor to total export earnings after coconut oil and kava.

The average price for copra on the world market declined to US$917 per ton in the December quarter, compared to US$991 per ton in the previous quarter.
total goods export earnings Table 2: Domestic Economic Indicators 2007 2008 2009 2010 2011 Real GDP Growth (%) Annual inflation rate (%) Production Copra(t) 6.8 6.3 3.5 2.2e 4.3e 4.1 5.8 2.3 3.4 1.2 30,816 37,587 15,258 36,066 40,320* Cocoa(t) 972 1,886r 2,465r 2,541r 1779* Beef(t) 2,936 3,278 3,032 3,537r 3,214* 7,336 16,545 5,316 10,325 12,000 316 438 477 490 734 81,345 90,657 100,675 97,180 93,824 85,737 106,13 8 124,818 140,468 154,938 89.0% 48.4% Na Na Na 48,944 55,125 56,924 61,071 62,644 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 3.4 0.7 0.6 1.0 1.2 0.2 -0.4 0.7 0.5 0.4 Coconut oil exports (t) Kava exports (t) Air arrivals (no.)
Cruise ship arrivals (no.)

Hotel Occ.

Rate Energy Consumptio n (kWh) Quarterly Inflation rate (year- ended %) Inflation rate (quarterly %) Production Copra(t) 10,086 11,445 r* 175r 702r 9,345r 8,238r 11,291* 677r 763 482r 917 445* 833* 576r 898 3,803 3,461 1,956 2,299 4,284 Cocoa(t) Beef(t) Coconut oil exports(t) 17 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 29,897 225 94 186 160 16,600 26,247 41,036 22,181 Kava exports (t) Air arrivals(no.)

Cruise arrivals(no.)

Total Non- Res.


Visitors Energy Consumptio n (KWh) * Estimate, NA – Not Available, p – projected, r - revised Source: Vanuatu National Statistics Office 73,300 51,119 15,807 67,283 15,959 16,097 40,965 57,565 31,988 61,885 14,682 230 25,146 30,866 56,012 15,906 Amid falling commodity prices that may have impacted the level of copra production, the level of coconut oil exports rose in the quarter to 4,284 tons valued at VT565 million, compared to 3,803 tons exported in December 2010.
Coconut oil export earnings made up 38 percent of total goods exported in the quarter (compared to 20 percent in the previous quarter), making it the highest contributor to total export earnings.

In the quarter, the average price for coconut oil in the world market declined to US$1,377 per ton from US$1,476 per ton in the September quarter.
Cocoa Cocoa production is estimated to have dropped slightly in the quarter to an estimated 445 tons valued at VT84 million compared to a revised 482 tons produced in the previous quarter valued at VT87 million.

Revised data showed an improvement in production during the mid- year of 2011.

There were 217 tons exported in the quarter valued at VT48 million, compared to a revised 380 tons exported in the previous quarter worth VT88 million.
Cocoa exports contributed 3 percent of goods export earnings (compared to 6 percent in the previous quarter).

The average price for cocoa in the world market dropped in the quarter 247 US cents per Kg (US$2,468 per ton) in the quarter, slightly down from 304 US cents per Kg (US$3,035 per ton) in the previous quarter.

Kava Due to buoyed demand from major regional markets, in particularly New Caledonia and Fiji, kava exports continue to perform well all through the year.
Kava exports rose 44 percent over the year to 230 tons valued at VT234 million.

Kava exports contributed 16 percent of total goods export earnings in the December quarter, the second highest contributor to total export earnings after coconut oil.
Figure 10: Quarterly Kava Exports (Volume and Value of Export; Quarterly Data) Export Volume (LHS) Export Value (RHS) Tons 250 200 150 100 50 MVT 250 200 150 100 50 0 Dec-05 Dec-07 Dec-09 Dec-11 Dec-06 Dec-08 Dec-10 0 Source: VNSO Beef Total beef production dropped 9 percent to 833 tons in the December quarter, with 4,259 cattle heads slaughtered.
The decline in the quarter was due to a drop in production from Santo Meat Packers Ltd (Luganville) down by 24 percent and VAL Pacific Ltd (major abattoir in Port Vila), which was also down by 2 percent compared to the previous quarter.

Beef exports declined 16 percent in the quarter to 245 tons valued at VT121 million compared to 290 tons in the previous quarter valued at VT132 million.
Beef exports contributed 8 percent of total goods export earnings in the quarter (down from 9 percent in the previous quarter).

The average price for beef in the world market rose in the quarter to 407 US cents per Kg (US$4,070 per ton) from 393 cents per Kg (US$3,937 per ton) in the previous quarter.

Other Export Products During the December quarter, live fish exports declined to 22 tons valued at VT30 million, with shipments contributing 2 percent of total value of exported goods.
Value of alcoholic drinks export declined to VT41 million.

Fish exports which contributed 1 percent of total exports rose to 425 tons valued at VT17 million.

The share of Other Products in total goods exports fell in the three months ending December to 13 percent (compared to 25 percent in the previous quarter), valued at VT193 million.
18 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Tourism Total non-resident visitor arrivals (cruise-ship plus air visitors) dropped 10 percent to 56,012 visitors in the December quarter and compared to 17 percent from 67,283 visitors in December 2010 quarter.

Both air and cruise-ship visitor arrivals declined in the quarter and over the year.
Figure 11: Non-Resident Visitor Arrivals (Thousands of Visitors; Quarterly Data) Cruise Ship Visitors Air Visitors Total No' 80 000 70 60 50 40 30 20 10 000sNo' 80 000 70 60 50 40 30 20 10 0 0 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Source: Vanuatu National Statistics Office followed by those visitors arriving Air visitors dropped 16 percent in the quarter to 25,146 visitors, with 24,298 visitors to Port Vila and 848 visitors to Luganville.
Holiday visitors continue to constitute the largest portion of air arrivals at 82 percent for meetings/conferences, visitors visiting friends/relatives and stopovers.

Australia, New Caledonia and New Zealand continued to be the major markets, with stronger increases from the New Caledonia market which picked up significantly in the quarter as a result of additional flight per week to Noumea introduced by Air Vanuatu in November.
Compared to the previous quarter, there was a drop in visitors arriving for holiday, visiting friends/relatives and visitors arriving for meeting/conferences from most major markets, led by New Zealand (-45 percent), Australia (-10 percent), Europe (-34 percent) and North America (-28 percent), however arrivals from New Caledonia saw increases (13 percent).

The seasonally-adjusted air arrival series declined 3 percent in the quarter.
Figure 12: Composition of Air Arrivals by Origin and Type of Visitor for the December Quarter 2011 2% 2% 1% 3% 5% 63% 11% 13% Source: VNSO Australia New Caledonia New Zealand Europe Other Pacific Countries N. America Other Countries Japan 1% 8% 9% 82% Source: VNSO Holiday Meeting/conferences Visiting Friends/Relatives Stop-over Compared to the December quarter of 2010, air visitor arrivals declined 4 percent, mainly holiday visitors with declines shown for major markets of Australia (-5 percent), Other Pacific Countries (-40 percent), North America (-18 percent) and Europe (-2 percent) while increases were shown for New Caledonia (7 percent), New Zealand (7 percent) and Japan (12 percent) driven mainly by those arriving to visit friends/relatives or attending meeting/conferences.
There were an estimated 15 cruise-ship visits to Port Vila during the December quarter compared to 16 visits in the previous quarter.

This included various en- route calls to the outer ports of Champagne Beach, Santo-Luganville, Wala Is and Mystery Island, shared amongst the P&O cruise fleet: Pacific Pearl, Pacific Dawn, Pacific Sun and Pacific Jewel (trips made from Sydney and Brisbane ports) which brought in 30,866 cruise visitors in the quarter.
Despite increased cruise visitor arrivals in November to December, visitors were down by 4 percent from the previous quarter and 25 19 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 percent over the year, clearly evident of its annual growth rate showing a downward trend Figure 13: Consumer Price Index (Percentage Change; Quarterly Data) Quarterly Year-ended % 6 5 4 3 2 1 0 -1 -2 % 6 5 4 3 2 1 0 -1 -2 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Source: VNSO Inflation The inflation rate, as measured by the Consumer Price Index (CPI) rose 0.4 percent in the December quarter 2011, compared to an increase of 0.5 percent in the previous quarter.
This resulted from an increase in prices for Port Vila by 0.3 percent and Luganville by 0.7 percent.

The major categories contributing to the increase in prices in the quarter included: miscellaneous (6.6 percent), household supplies (4.9 percent) and transport (2.8 percent), while slight change were shown for communication (0.2 percent) and recreation (0.1 percent).

Underpinning these price increases were furniture and fuel.
Declines in prices was recorded for clothing & footwear (-2.6 percent), food (-0.6 percent), health (-0.5 percent), drinks & tobacco (-0.1 percent) and housing & utilities (- 0.1 percent).

The decline in prices for this group was mainly due to price drop in women and children clothing, fruits and vegetables, packets of cigarette and stationery.
(0.4 percent), education In annual terms, the CPI rose 1.2 percent over the year to December quarter 2010, up from 1.0 percent increase recorded in the previous quarter.

Port Vila recorded an increase of 1.4 percent and Luganville of 0.4 percent.
The expenditure groups contributing to the increases over the year included: education (5.0 percent, recreation (4.8 percent) and miscellaneous (4.5 percent), while drinks & tobacco (1.8 percent), housing & utilities (1.6 percent) and household supplies (1.1 percent) rose moderately during the same period.

Decline in prices were shown for clothing & footwear (- 0.6 percent) and transport (-2.3 percent) due to declining prices for airfares and footwear.
Underlying inflation1 rose 0.2 percent in the December quarter of 2011 and 1.9 percent over the same period of 2010.

1 Measure derived by Vanuatu National Statistics Office from the CPI excluding items which typically have unstable or volatile prices due to seasonal variation or policy decisions 20 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 less than the collection recorded in the previous and same quarter of last year respectively.
Taxes on the use of goods reached VT1857.9 million or 66.4 percent of total tax revenue.

This is 15.6 percent decrease compared to the previous quarter and 4.4 percent less than collected in same period of last year.

Of this amount, value added tax (VAT) made up VT1199.3 million, accounting for 64.6 percent of the total.

VAT declined over the quarter by 13.6 percent and increased 4.2 percent over same quarter of 2010.
Both revenue from business licenses and turnover tax dropped over the quarter and same period of last taxes which year.

Similarly, revenue from other comprise mainly of excise taxes dropped 16.0 and 12.7 percent over the quarter and the same quarter of 2010 respectively.

Figure 15: Taxes on the use of goods (Levels; Millions of Vatu; Quarterly data) 3.2 FISCAL OPERATIONS Total fiscal revenue during the quarter was VT3423.2 million.
This is 12.9 percent and 4.9 percent less than the previous quarter and same quarter of last year respectively.

Both domestic revenue and grants from abroad contributed to these declines.

Total expenditure and net lending during the quarter amounted to VT3946.7 million, equivalent to 7.9 percent less than last quarter and 23.1 percent less compared to same period of 2010.

These reductions were mainly attributed in development expenditures.
to falls This resulted in fiscal budget deficit for the quarter of VT523.6 million.

This is VT167.0 million more than the deficit recorded in the preceding quarter.

3.2a.

Government Revenues Total recurrent revenue collected during the quarter stood at VT3,133.2 million or 90.9 percent of total revenue for the quarter.

This is 11.3 percent less than what was collected in the September quarter and 0.1 percent higher than collected in the same quarter of 2010.
Figure 14: Fiscal Revenue (Contribution to Year-Ended growth**; Quarterly Data) Revenue collection through taxes on international trade, which comprises entirely of import duties, reached VT821.7 million during the quarter or29.4 percent of tax revenue.

This is 8.5 percent and 6.0 percent higher than level reached in the previous quarter and corresponding quarter of 2010 respectively.
Revenue collected through property taxes recorded a decline of 10.4 percent over the quarter to VT116.8 million, accounting for 4.2 percent of total tax revenue during the quarter.

This is 15.5 percent higher than what was collected in same quarter of 2010.

Of total recurrent revenue collected during the quarter, tax revenue made up 89.8 percent at around VT2796.4million.
This is 9.5 percent and 0.9 percent 21 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 consisted VT2059.5 million (73.6 percent), equivalent to a1.0 percent and 12.8 percent reduction compared to previous quarter and corresponding quarter of 2010.

Payment on interest for external and domestic debt during the quarter totaled VT44.4 million, 1.3 percent of total recurrent expenditure.

This is 74.7percent and 20.7 percent less than previous quarter and same quarter of last year correspondingly.
Out of this, domestic interest payment totaled VT27.1 million.

Subsidies and transfers made during the quarter was at VT465.2 million, representing 13.5 percent of total recurrent expenditure.

Of this amount, VT56.4 million was in transfers made to provinces and municipalities.

Figure 17: Recurrent Expenditure (Contribution to Year-Ended Growth *; Quarterly Data) Non-tax revenue collection during the quarter was VT316.8 million, 10.2 percent of total recurrent revenue.
This is a 24.9 percent fall compared to preceding quarter and 9.1 percent higher than levels reached during same quarter of 2010.

The total of all grants received during the quarter stood at VT309.6 million, a decrease of 25.8 percent and 36.8 percent over the quarter and same period of last year respectively.

3.2b.

Government Expenditures the quarter Total government expenditure during totaled VT3946.7 million, a decline of 7.9 percent over the quarter and 23.1 percent over the same period of last year.
Recurrent expenditure during the quarter was VT 3442.4 million, representing 87.2 percent of total expenditure during the quarter.

This is 3.1 percent higher than previous quarter but less by 8.5 percent in the same quarter of 2010.

Figure 16: Fiscal Expenditure (Contribution to Year-Ended Growth**; Quarterly Data) Total spending on acquisition of fixed capital assets stood at VT135.8 million, 3.9percent of recurrent expenditure.
This is some 126.0 percent more than previous quarter but was 5.7 percent less than level the same quarter of 2010.

Development expenditures made during the quarter were VT504.3 million or 12.8 percent of total expenditure.

This is a decrease of 46.6 percent and 47.9 percent compared to the previous quarter and corresponding quarter of 2010 respectively.
Of the total recurrent expenditure made, spending on goods and services made up 81.3 percent at VT 2796.9 million, an increase of 4.7 percent over the quarter and a16.1 percent decrease over same period of last year.
Of this amount, wages and salaries 22 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Finance Centre Local Figure 19: Expenditure (Contribution to Year-Ended growth; Percent) Institution Recurrent expenditure made by financial institutions during the quarter was around VT1.7 billion, of which 29.5 percent was compensation to employees, 2.7 percent rent payments, 13.5 percent interest payments, and 54.2 percent other recurrent expenditures during the quarter.
Total taxes and levies paid by financial institutions in Vanuatu totalled to VT86.6 million.

This is VT9 million less compared to the last quarter.

Of this amount, payment for central government fees made up 86.7 percent, import duties 3.2 percent and local government revenue of 10.2 percent.

Over the quarter, capital expenditures increased by 163 percent reaching VT294.6 million.

The increase is attributed mainly to capital expenditures made by banks; more from within domestic commercial banks.
specifically 3.2c.

Financing Recurrent budget balance for the quarter was a deficit of VT329.1 million, while total fiscal balance was a deficit of VT523.6 million.

These deficits were financed mainly from rollover of government domestic bonds and the issue of new bonds during the quarter and over the year.

Total outstanding government bonds as of the quarter was at VT4234.9 million, a 2.42 percent increased compared to previous and 28.9 percent compared to same quarter of 2010.
Figure 18: Outstanding Government Bonds (Bond Holders; Levels; Quarterly Data) 3.3 Financial Centre Development 3.3a.

Vanuatu Finance Centres Total local expenditure made by financial institutions in Vanuatu totalled VT2.5 billion during the quarter.

This is VT435 million more in the last quarter.

The increase was mainly driven by recurrent expenditures made by banks, including the four commercial banks in Vanuatu.
capital and 23 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Figure 20: Value of Total Asset owned by Vanuatu Financial Centre Institutions (levels, quarterly data) Figure 21: Companies on Company Registry (Level; (000)) Total assets owned by financial institutions in Vanuatu in the quarter was estimated to be at VT63.9 billion.

This is 0.02 percent less compared to previous quarter.
Total number of employees employed by financial institutions in Vanuatu as of the quarter was estimated at 744 workers altogether.

Of this, 79 are expatriates.

Total of all company fees collected during the quarter amounted to VT45.0 million, of which 73.5 percent came from stamp duty.

Shipping Registration2 3.4 MONETARY DEVELOPMENTS Total number of ships on the registry during the quarter stands at 691 ships.

This is 3 ships more than registered in the preceding quarter.
During the quarter, Vanuatu Marine-time Authority shipping registry registered 23 fresh ship registration and 20 ships deregistration.

The Vanuatu Marine Service Limited collected an estimated VT30.7 million in shipping fees.

Of this amount VT1.3 million was allocated to Marine Participation and Investigation Fund (MPIF).

3.3b Company Registration Total number of companies on the Vanuatu Financial Services Commission company’s registry as of the quarter is 3821.
This is 282 companies more than registered in the previous quarter.

Summary Broad Money supply (M2) increased by 1.1 percent during the December quarter, to reach VT57,287.6 million, following an increase of 2.5 percent recorded during the previous quarter.

The year-ended change in M2 in December was 1.3 percent, lower by 2.3 percent over the year to September 2011.
The increase over the quarter was driven mainly by domestic credit growth of 3.9 percent while the banking system’s net foreign assets recorded a 2.1 percent decrease.

Figure 22 shows the year-ended growth of money supply (M2) up to the December quarter.

Domestic credit maintained a positive growth over the year, whilst NFA continued to decline, however the yearly rate of decline has slowed to its lowest level since 2009.
2 2 During the last quarter shipping registration and shipping fees figures have been revised significantly.

Please refer to table at the back.

24 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Figure 22: Determinants of Money Supply (Percentage Change; Year-on-Year Growth) Figure 23: Net Foreign Assets (Percentage Change; Year-on-Year Growth) Commercial banks’ liquidity3 holdings increased during the quarter mainly due to increases of RBV Notes and the excess reserves.
Both Commercial banks’ lending rates and interest on overall deposits increased during the quarter.

The weighted average interest rate on fixed deposits also showed an increase.

The quarterly decrease in NFA resulted from a 10.1 percent decrease in the commercial banks’ foreign assets, outweighed a 6.5 percent decrease in its foreign liabilities.
Over the year, commercial banks recorded a 25.6 percent decline in foreign assets and a 19.3 percent decrease in foreign liabilities, resulting in a 33.7 percent decline in the overall NFA.

The Reserve Bank’s rediscount rate was maintained at 6.00 percent throughout the quarter.

Domestic Credit Determinants of Money Supply Net Foreign Assets (NFA) the banking system; The net foreign assets of decreased by 2.1 percent during the December quarter, representing a decrease of 8.1 percent over the year.
The quarterly decrease stemmed from a 15.3 percent decrease in the NFA holdings of commercial banks, while the Reserve Banks’ holdings increased by 5.4 percent.

Domestic credit expanded by 3.9 percent during the reviewed quarter and 11.2 percent over the year to December 2011.

The growth in the quarter was due primarily to an increase in loans to the private sector, loans to non-financial public enterprises, claims on municipalities and claims on government.
Growth in total loans and advances4 extended to the private sector in the reviewed quarter was 2.2 percent, as compared to 2.5 percent recorded during the December quarter.

The annual growth for the year to December noted an increase of 9.1 percent recorded over the year compared to 9.9 percent recorded in the previous quarter.

Total business lending increased by 0.7 percent and 9.5 percent over the quarter and over the year respectively.
Loans individuals & households increased by 3.6 percent and increased 7.0 percent over the quarter and over the year to the December quarter, respectively.

to 3 Commercial banks’ liquidity consists of commercial banks’ excess reserves plus holdings of RBV Notes.

4 Includes data from the commercial banks and RBV.


25 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Figure 24: Private Sector Credit (Year-On-Year Growth; By Categories) Table 3: Contributions to Growth in Private Sector (Contribution to Year Ended Growth; By Sectors) Commercial Banks Sectoral Distribution of Loans and Advances Housing & land, tourism, and professional & other services, made largest contributions to the year-on-year increase in private sector credit.
The mining & quarrying, entertainment & catering, manufacturing, distribution, and financial institutions categories made smaller contributions over the year.

The remaining categories made negative contributions to the annual growth rate.
SECTOR Agriculture Fisheries Mining & Quarring Manufacturing Distribution Tourism Entertainment & Catering Transport Public Utilities Construction a) Central Government b) Public Corporation Financial Institutions Professional & Other Services Housing & Land Purchases Other Personal Miscellaneous TOTAL of which Vatu: (Millions of Vatu) Dec-10 806.9 59.1 122.4 1704.0 3415.9 3994.1 166.1 1494.5 37.5 7339.5 27.9 18.0 215.0 2014.6 13545.1 8009.4 1574.0 44544.1 36048.7 Sep-11 677.6 46.6 139.6 1850.2 3302.9 3779.6 320.4 1563.7 50.4 7203.2 26.0 21.3 581.4 3223.0 15033.6 7675.6 1673.7 47168.8 37196.4 Dec-11 659.4 39.1 146.1 1832.8 3471.5 4762.2 322.9 1406.1 50.1 7214.7 29.8 21.0 591.2 3113.4 15829.0 7892.7 1225.1 48,607.2 38116.9 NB: Loans to Central Gvt does not include government Bonds Commercial banks’ lending to non-financial public enterprises increased to 410.2 million from 88.3 millions5.
Loans to municipalities increased by 239.1 percent and 112.7 percent over the quarter and over the year to December 2011, respectively.

The Government’s net credit position vis-à-vis the banking system deteriorated in the December quarter.

This resulted from increases of VT158.0 million and VT121.0 million in the Reserve Bank’s net claims on the Government and the commercial Banks net claims on government, respectively.

Over the year to December 2011, the Government increased.
the banking system’s net claims on 5 There was a previous misclassification in the data which may explain some of this change.

26 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Figure 25: Net Claims of Vanuatu Government (Vis-à-vis the Total Banking Sector; Billions of Vatu) Interest Rates The weighted average interest rate on deposits increased to 2.81 percent during the quarter from 1.69 percent in the previous quarter.
The weighted average interest rates on fixed deposits increased to 5.4 percent from 5.1 the previous quarter.

Lending rates increased during the quarter, with the weighted average interest rates on total bank loans increasing to 10.28 percent from 9.69 percent in the previous quarter.

Over the period, the spread on commercial banks’ interest rates increased to 8.4 percent from 8.0 percent.
Figure 27: Interest Rate Spreads (Spread between Average Lending and Deposit Rates) Measures of Money Supply The overall increase in money supply (M2) during the quarter was driven by both narrow money (M1) and quasi-money of 0.4 percent and 1.5 percent, respectively.

This compares to 2.8 percent increase in quasi-money and 2.2 percent increase in M1 recorded last quarter.
The quarterly increase in M1 was attributed to a 4.1 percent increase in currency outside banks while demand deposit noted a small decrease during the period.

Figure 26: Money Supply Components (Percentage Change; Year-on-Year Growth) Reserve Money Reserve money6 increased by 1.2 percent during the reviewed quarter.

Over the year to December 2011, it increased by 4.5 percent.
The quarterly increase was due to an 8.9 percent increase in currency in circulation while excess reserves noted a decline of 15.5 percent.

The SRD increased by 3.4 percent.

6 Reserve Money or ‘Base Money’ is comprised of currency in circulation, Statutory Reserve Deposits (SRD), and Excess Reserves.
27 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Figure 28: Components of Reserve Money (Levels; Billions of Vatu) Over the quarter, VT1.24 billion was allotted to 7 and 14 days portfolio and VT1.22 billion was allotted to 28, 63, and 91 days portfolio.

Figure 29b: RBV Notes Yields (Level, Percentage, Month-End Data) 3.5 MONEY MARKET DEVELOPMENT Commercial banks’ excess reserve peaked at over VT3.07 billion towards the end of October 2011 but fell back to VT2.55 billion at the end of December quarter.
Figure 29a: Bank Excess Reserves (Levels, Millions of Vatu, Month-End Data) The yield on 91 days Notes rose from below 2 percent to 3.95 percent and later fell to 3.25 percent.

63 day Notes also increased substantially up to 2.95 percent.

The yields on 28, 14 and 7 days remained below 3 percent.

At the end of this quarter, total outstanding RBV Notes rose to VT1.63 billion from VT1.04 billion at the end of the preceding quarter.
Over the quarter, the Bank floated VT6.14 billion in RBV Notes and received VT9.23 billion in bids from commercial banks.

Of that amount, VT5.48 billion was accepted.

The Bank redeemed VT4.79 billion RBV Notes over the period.
28 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 3.6 BANKING SECTOR DEVELOPMENTS Capital Domestic Banks Financial Position Figure 30: Asset Position – Domestic Banks (Levels; billions of Vatu) 90 VT 80 70 60 50 40 30 20 10 - Foreign Domestic 90 V T 80 70 60 50 40 30 20 10 0 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 For the December 2011 quarter, the domestic banking industry experienced a slight drop in its overall financial position although registering a further growth in its private sector credit.
The banks overall total assets declined by 2.2 percent to VT81.9 billion (VT83.7 billion: Sep-11) reflecting mainly a fall in foreign assets by 9.1 percent to VT19.4 billion (VT21.3 billion: Sep- 11).
Domestic assets on the other hand increased by 0.2 percent to VT62.5 billion (VT62.4 billion: Sep-11).The quarterly reduction largely attributed to a 10.8 percent decrease in balances due from banks overseas to VT16.6 billion (VT18.6 billion: Sep-11), while increase in domestic assets is sourced mainly from a 2.2 percent increase in claims on private sector to VT47.9 billion (VT46.8 billion: Sep-11).
foreign assets in is The industry’s liabilities (excluding capital) fell by 2.3 percent to VT70.7 billion (VT72.4 billion: Sep-11).

The decline was driven by reduction in both domestic and foreign liabilities by 1.5 percent and 5.6 percent to VT 56.8 billion (VT57.6 billion: Sep-11) and VT13.9 billion (VT14.8 billion: Sep-11) respectively.
Figure 31: Capital Adequacy & Tier 1 Ratio (Quarterly Data) 70 VT 60 50 40 30 20 10 0 30 % 25 20 15 10 5 0 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Total Tier 1 capital Capital Base Total Risk Weighted Assets The industry remained strongly capitalized with an aggregate capital adequacy ratio (CAR) of 21.3 percent (up from 21.2 percent in the previous quarter) and Tier 1 capital to total risks weighted assets of 18.7 percent.
These ratios are well above the Reserve Bank’s minimum capital requirement of 12 percent.

At this position however, the industry’s overall capital base fell by 1.0 percent to VT9.8 billion (VT9.9 billion: Sep-11).

This largely reflected a fall in Tier 2 capital by 30.3 percent to VT1.2 billion (VT1.8 billion: Sep-11) and mainly driven from a 3.8 percent fall in general provisions for doubtful debt to VT421.3 million (VT438.1 million: Sep-11).
Conversely, Tier 1 capital increased by 5.3 percent to VT8.5 billion (VT8.1 billion: Sep-11) sourced mainly from increase in disclosed reserves and retained earnings by 9.2 percent to VT5.1 billion (VT4.7 billion: Sep-11).

Despite the decline in the industry’s capital base, the improvement in its capital adequacy ratios reflected the decline in total risk weighted assets by 1.8 percent to VT45.7 billion (VT46.6 billion: Sep-11) over the reviewed quarter.
This is mostly triggered from a decrease in risks allocated to off balance sheet assets by 2.0 percent to VT40.7 billion (VT41.6 billion: Sep- 11) and operational risk assets by 0.2 percent to VT4.9 billion (VT5.0 billion: Sep-11).
29 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Financial Performance Figure 32: Earnings – Domestic Banks (Quarterly Data; Billions of Vatu) 0.0 0.5 1.0 1.5 2.0 VT 2.5 Dec-11 Jun-11 Dec-10 Jun-10 Dec-09 0.5 0.0 1.5 Net operating income (loss) 1.0 2.0 2.5 VT Operating profit before tax, write-offs & provisions Net Interest Income The domestic banking industry’s financial performance improved again over the December 2011 quarter after recording a one-off loss in the September 2011 quarter.
Total operating profit before tax, write-offs and provisions reached VT526.2 million, a quarterly increase of 82.4 percent (VT288.4 million: Sep-11).

This increase resulted from a significant decline in total operating expenses by 16.1 percent to VT1.4 billion (VT1.6 billion: Sep-11) which more than offset the decrease in total operating income by 1.3 percent to VT1.9 billion.
Moreover, the increase in earnings reflected growth in net interest income by 3.5 percent to VT817.0 million (VT789.3 million: Sep-11) recorded over the quarter.

After allowing for provisions and bad debts written-off over the quarter, the industry’s net operating profit is VT400.3 million (Net loss of VT724.2 million: Sep-11).

This improvement led to increased efficiency ratios recorded over the quarter.
Return on asset (ROA) grew from 0.4 percent to 0.6 percent and return on equity (ROE) increased from 2.6 percent to 4.7 percent.

Also, during the quarter, the industry’s interest income to operating income ratio reached 68.9 percent up from 65.6 percent in the previous quarter and operating expenses to total expenses ratio fell to 72.3 percent from 85.0 percent.

The industry’s interest expenses to total expenses ratio increased to 35.8 percent from 28.9 percent.
Asset Quality Figure 33: Asset Quality – Domestic Banks (Share of Total Loans, By Loan Category) % 100 Standard 90 80 70 60 50 40 30 20 10 0 Doubtful Substandard Loss % 7 6 5 4 3 2 1 0 Impaired assets of the domestic banking industry improved moderately over the quarter under review after reporting a huge deterioration in the previous quarter.

This quarter showed a decline of 3.8 percent to VT4.0 billion (VT4.2 billion: Sep-11) and accounted for 8.1 percent of total loans.
The reduction is attributed to a fall in loss loans by 19.2 percent to VT1.0 billion (VT1.3 billion: Sep-11).

Although impaired assets continued to remain high, the domestic banking industry continued to maintain high quality standard loans representing 89.3 percent of total loans.

Over the quarter however, the domestic banks total lending increased 3.1 percent to VT49.5 billion (VT48.0 billion: Sep-11).
The increase mostly reflected growth in standard loans by 3.8 percent to VT44.2 billion (VT42.6 billion: Sep-11).

Substandard and doubtful loans also increased by 1.1 percent and 2.9 percent to VT1.3 billion and VT2.9 billion respectively but constituted a minor fraction of the industry’s total lending of 2.5 percent and 6.1 percent respectively.

Loss loans accounted for 2.1 percent of the total loans.
30 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 in the industry’s reduction impaired assets The consequently reduces all provisioning levels in all categories.

Specific and general provisions fell by 7.3 percent and 37.9 percent to VT1.8 billion (VT1.9 billion: Sep-11) and to VT606.2 million (VT976.6 million: Sep-11) respectively.

Security held by banks also dropped by 21.7 percent to VT31.5 billion (VT40.2 billion: Sep-11).
This increased the ratio of impaired assets to total provisions from 13.1 percent to 16.8 percent while general provisions to risk assets dropped from 1.7 percent to 1.0 percent over the quarter.

million, mining and quarrying by 4.7 percent to VT146.1 million, and government by 108 percent to VT54.1 million.

All other major sectors, such as transport, manufacturing, professional & other services and agriculture depicted negative growths.
Of these sectors, personal credit continued to dominate the private sector credit representing 48.8 percent (VT23.7 billion) of total private sector credits.

This is followed by construction, 14.8 percent (VT7.2 billion); tourism, 9.8 percent (VT4.8 billion); distribution, 7.1 percent (VT3.5 billion); and professional and other services, 6.4 percent (VT3.1 billion).
Private Sector Lending Liquidity position Figure 34: Private Sector Credit Domestic Banks (Share of Total Loans; By Industry; Quarterly Data) % 18 % 60 Construction Personal 50 40 30 20 10 0 Tourism Distribution Professional & other services 16 14 12 10 8 6 4 2 0 Figure 35: Liquid asset ratio –Domestic Banks (Quarterly Data) Average LAR - Industry Minimum regulatory requirement 25 % 20 15 10 5 - % 25 20 15 10 5 0 (4.5 percent), construction The industry’s private sector credit grew again over the quarter under review, up 3.1 percent to VT48.6 billion (VT47.1 billion: Sep-11).
This reflected mainly growth in (0.2 percent), personal tourism (25.5 percent) and distribution sector (5.1 percent) to VT23.7 billion, VT7.2 billion, VT4.8 billion and VT3.5 billion respectively.
Growth over the quarter is also a result of positive growth for financial institutions by1.7 percent to VT591.2 million, entertainment and catering by 0.8 percent to VT322.9 industry’s liquidity position remained The overall satisfactory over the quarter ended December 2011 with total liquid assets recorded at VT7.1 billion, equivalent to 13.4 percent of total domestic deposits.
At the end of December 2011, the industry’s liquid asset ratio (LAR) stood at 18.2 percent, up from 17.3 percent in the previous quarter and is constantly maintained well above the Reserve Bank’s minimum regulatory requirement of 7.0 percent.

It is important to note that while LAR in the industry is high, the distribution of it within the banks is uneven.
31 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 Foreign Exchange Turnover Figure 36: Foreign Exchange Turnover Position of Domestic Banks (Quarterly Data) VT 10 9 8 7 6 5 4 3 2 1 0 VT 10 9 8 7 6 5 4 3 2 1 0 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Against Vatu Against USD Cross Currency Total total foreign exchange The domestic banks total foreign exchange turnover depends solely on the rates offered locally and abroad.
At the end of December 2011 quarter, the domestic banks turnover (including foreign exchange against other currencies) dropped significantly down 30.7 percent to VT6.1 billion (VT8.8 billion: Sep-11).
The decline is attributed to a decline in foreign exchange dealings against the Vatu currency by 32.9 percent to VT5.2 billion and foreign exchange dealings against the USD currency by industry 18.6 percent predominantly struck deals against Vatu and USD, however during the quarter banks’ dealings against other currencies increased by 178.3 percent to VT75.3 million (VT27.1 million: Sep-11).

to VT830.6 million.
to VT830.6 million.

The International Banks Statement of Financial Position The international banks’ overall financial position improved during the quarter by 26.2 percent to (USD66.8 million: Sep-11).

The USD84.3 million improvement is attributable exclusively to growth in cash items by 57.0 percent to USD51.6 million (USD32.8 million: Sep-11).

Contributing to this growth 32 are collective increases in cash and balances, and CDs issued by banks to USD35 million (USD15.8 million: Sep-11).
All other asset components declined marginally during the period, including marketable securities (up to 1 year original maturity) by 4.7 percent to USD2.8 million; loans & advances by 3.4 percent to USD23.8 million; investments (over 1 year maturity) by 3.5 percent to USD5.8 million and other assets by 15.5 percent to USD312 thousand.
Figure 37: Offshore Banking Industry – Total Assets (Millions of USD, Quarterly Data) 80 US 70 60 50 40 30 20 10 0 120 US 100 80 60 40 20 0 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 CASH ITEMS MARKETABLE SECURITIES (up to 1 yr.
Original Maturity) LOANS AND ADVANCES INVESTMENTS (over 1 year original maturity for debt instruments) TOTAL ASSETS (RHS) The industry’s aggregated liabilities (less capital) also increased by 29.2 percent from USD60.9 million to over USD78.8 million, as a result mainly from growth in deposits by 29.5 percent to USD78.0 million (USD60.3 million: Sep-11) during reviewed quarter.
Statement of Financial Performance The aggregated financial performance of international banks indicated considerable improvement over the December 2011 quarter after recording loss in the September 2011 quarter.

The improvement resulted mainly from net gains7 registered in foreign exchange, despite recording higher total operating expenses and 7 Net gain/loss is comprised of gain/loss on securities, foreign exchange, and other gains excluding banks normal operating income.
QUARTERLY ECONOMIC REVIEW DECEMBER 2011 USD478 thousand in Sep-2011 to USD1.6 million (Dec- 11).

Figure 39: Offshore Banking Industry – Capital (Millions of USD & Percent; Quarterly Data) 40 USD 35 30 25 20 15 10 5 0 0.25 % 0.20 0.15 0.10 0.05 0.00 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 TOTAL TIER 1 CAPITAL CAPITAL BASE Total Risk Weighted Assets Ratio of Capital Base to Total Risk Assets (RHS) Total risk weighted assets slightly dropped by 1.5 percent to USD31.3 million (USD31.8 million: Sep-11).
Tier 1 capital account for approximately 100 percent of capital base therefore given the slight drop in risk weighted assets, both the CAR and Tier 1 ratios improved slightly from 18 percent (Sep-11) to 19 percent (Dec-11).

lower total operating income over the quarter.

Total net profit reached USD70 thousand (Loss of USD164 thousand: Sep-11).
Contributing to this growth are increases in total operating income by 27.8 percent to USD865 thousand (USD677 thousand: Sep-11) and net gain which improved from a loss of USD18 thousand in the previous quarter to USD75 thousand in the December 2011 quarter.

Total operating expenses also grew by 5.7 percent to USD870 thousand (USD823 thousand: Sep-11) over the quarter.
The quarterly increase in total operating income is sourced mainly from increase in non-interest income by 149 percent to USD374 thousand (USD150 thousand: Sep- 11) while increase in net gain is due to growth in foreign exchange earnings by 800 percent to USD63 thousand (USD7 thousand: Sep-11).

Net interest income on the other hand decreased by 52.3 percent to USD21 thousand (USD44 thousand: Sep-11).
Figure 38: Offshore Banking Industry Earnings (Thousands of USD; Quarterly Data) -0.4 -0.2 0.0 0.2 0.4 0.6 USD B 1.0 0.8 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Capital -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 Net income/profit Net gain/loss Total operating expense Total operating income 1.0 USD B The international banks’ capital comprised mainly of Tier 1 Capital, hence, the increase of 2.2 percent in the industry’s capital base to USD6.0 million (USD5.9 million: Sep-11) was attributable to growth in the industry’s Tier 1 Capital’s un-appropriate retained earnings (of USD2.0 million increase) from a loss of 33 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 3.7 BALANCE OF PAYMENTS The balance of payments for December quarter 2011 recorded a surplus of VT 566 million.
This was driven by movements in official foreign exchange reserves at the end of the quarter.

The current account recorded a deficit of VT1633.6 million in the December period, up from VT1515.4 million the previous quarter.

Over the year, the current account deficit had expanded by 48.6 per cent due to major reductions in net services and net current transfers accounts.

In the December quarter, net errors and omissions recorded a value of VT 402.2 million due to outflows not captured in the statement.
Table 4: Balance of Payments Summary (Millions of Vatu; Quarterly Data) Table 1: Balance of Payments Statistics Summary in Vatu Millions Balance on Trade in Goods Exports f.o.b.

Imports f.o.b.

Balance on Trade in Services Services credit Services debit Balance on Primary Income Primary income credit Primary income debit Balance on Secondary Income Secondary income credit Secondary income debit Balance on Current Account Balance on Current Account (excl.
reinvested earnings) Balance on Capital Account Financial Account Financial assets Financial liabilities Q410 (5,037) 1,446 (6,483) 3,926 7,147 (3,220) (347) 876 (1,223) 359 431 (72) (1,099) (28) 165 (1,715) (256) Q111 (4,133) 1,399 (5,532) 1,973 4,739 (2,766) (223) 1,000 (1,223) 189 239 (50) (2,194) (1,301) 822 (1,966) (30) Q211 (3,585) 1,597 (5,182) 3,517 6,648 (3,131) (528) 961 (1,489) 483 525 (42) (113) 828 747 (2,133) (1,977) Q311 (4,669) 1,532 (6,201) 3,975 7,339 (3,364) (1,069) 839 (1,908) 247 302 (55) (1,515) (618) 250 (392) 263 Q411 (4,886) 1,490 (6,376) 3,261 6,831 (3,570) (234) 996 (1,230) 226 263 (37) (1,634) (457) 310 (1,214) 512 Level of Official Reserves at end of period 15,035 15,171 15,369 15,620 16,259 Merchandise Trade The Trade deficit account further increased over the December quarter, showing a 2.8 percent increase in imports outweighing a 2.7 percent decline in exports.
Over the year, the trade deficit declined due to increased exports by 3.0 percent and imports falling 1.7 percent.

The decline in exports over the December period was due mainly to major declines in all export commodities with the exception of coconut oil and timber.
Coconut oil recorded the highest value of 38 percent of total domestic exports, followed by other domestic exports such as shells, cowhides, coffee, vanilla, live fish and other products (22 percent), kava (16 percent) and, copra (11 percent).

Cocoa, beef and timber recorded less than 10 percent of total exports.

Around 70 percent of export earnings are denominated in US dollars, and the depreciation of the US dollar against the Vatu over is partly attributable to the worsening of exports over the period.
the December quarter The upsurge in imports over the period reflects a 68 percent increase in goods not specified.

Most of Vanuatu’s imports originated from Australia and the appreciation of the Australian dollar in the December quarter had also contributed to the high value of imports during the period.

Food and live animals continued to record the highest value of total imports for home consumption over the period.
Other imports included mineral fuels which accounted for 20 percent, (19 percent), basic machinery and import manufactures commodities not mentioned above than 10 percent).
(12 percent), and other transport (less Figure 40: Quarterly Current Account Balance (Millions of Vatu) 6000 VTm 4000 2000 0 -2000 -4000 -6000 -8000 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 goods services income transfers CAD Source: RBV Services Account The services account continued to remain in surplus, recording a decline over the December quarter.

This was driven by service inflows falling 6.9 percent while service outflows grew by 6.1 percent.
Tourism earnings which contributed approximately 80 percent to the service inflows declined over the quarter due to the reduction in both air and day visitors.

Over the year, the net services account declined due to a 3 percent decline in services inflows offsetting a 2.7 percent decline in services outflows.

Freight payments increased over the quarter reflecting higher imports.
Usually freight payments consist of 34 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 around 50 percent of the total services payments, meaning that overall services payments tend to be linked to goods freight imports.

In addition to the high freight bills, most other services items also recorded high net outflows during the quarter contributing to an overall increase in services payments.
Figure 41: Tourism Earnings (Billions of Vatu; Quarterly Data) 7 VTb 6 5 4 3 2 1 D e c - 0 4 Source: RBV Income Tourism Earnings Estimates D e c - 0 5 D e c - 0 6 D e c - 0 7 D e c - 0 8 D e c - 0 9 D e c - 1 0 D e c - 1 1 in to increases Primary- The net income deficit declined by 78 percent due income receipts along with decreases in income payments.

The increase in income receipts resulted from increases in compensation of employees as well as investment income of residents.
The RSE inflows continued to increase over the quarter due to increases in labour stock.

The reduction in income payments is due to the decline in distributed profits of the host investment companies foreign direct economy.

in VTb 14 12 10 8 6 4 2 Capital and Financial Account The capital account recorded an increase of 24 percent over the December quarter due to the rise in funds for long term government projects by major donors.
The financial assets of the financial account saw a large decline of VT822 million in the December quarter due to significant decreases in other investment in currency and deposits.

Liabilities on the other hand increased over the period reflecting increases in other investment in currency and deposits.
At end December 2011, foreign exchange reserves were sufficient to finance 6.8 months of imports, down from 7.3 months in the previous quarter which is well above the Bank’s minimum threshold level of 4 months of import cover.
Figure 42: Reserves and Months of Import Cover (Billions of Vatu and Months; Quarterly data) mth 8 Mths 6 4 2 0 0 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Source: RBV NET FX Import Cover of Goods Secondary- The secondary income account surplus, which is comprised of current transfers, showed a decline of 9 percent, reflecting a reduction in transfers of deposit taking corporations and other sectors apart from the government sector.
Year-on-year change showed a 32.2 percent decline in the net secondary income account reflecting a 47.4 percent in income receipts outweighing the 42.7 percent in income payments.

3.8 EXCHANGE RATE DEVELOPMENTS The exchange rate developments of the vatu vis-à-vis its major trading currencies for December Quarter are shown in the following table and charts.
During December quarter, the vatu appreciated against the US dollar (USD), Euro and New Zealand 35 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 growth figures in the last months of 2011.

Over the quarter the RBA decided to cut their policy rates citing slower price growth and moderate GDP growth resulting from a slowdown in global activity and fall in commodity prices.
Figure 44: Exchange Rate against NZD and EUR (Indices; December 2007=100) 115 INDEX 115 INDEX 110 105 100 95 90 85 80 Vatu/EUR Vatu/NZD 110 105 100 95 90 85 80 75 Dec-07 Dec-08 Dec-09 Dec-10 75 Dec-11 In December, the Reserve Bank of New Zealand left its policy interest rate unchanged at 2.50 percent and is expected to remain stable given the unusual degree of uncertainty around global conditions and the moderate pace of domestic demand.
Even though export commodity prices were high, NZD depreciated against the Vatu over the quarter however by historical standards it remains strong.

Despite progress made towards a regional agreement aimed at stabilizing economic problems during the quarter, the ongoing sovereign debt crisis continued to be a major factor driving the depreciation of the EUR.
Furthermore over the quarter the ECB decided to cut interest rates 50 basis points and implement unprecedented intervention in the banking system further weighing on the euro.

Dollar, but depreciated against the Australian dollar (AUD).
Vatu/USD Vatu/AUD Vatu/NZD Vatu/EUR Dec-11 1 month ago %▲ 93.56 93.77 -0.2 94.91 94.05 0.9 3 months ago 94.32 92.24 %▲ -0.8 2.9 12 months ago 93.15 94.72 %▲ Note: (-) appreciation of vatu 0.4 0.2 72.17 71.48 1.0 72.69 -0.7 71.84 -0.5 121.29 124.99 -3.0 128.22 -5.4 123.75 -2.0 Figure 43: Exchange Rate against USD and AUD (Indices; December 2007=100) INDEX 125 120 115 110 105 100 95 90 85 Vatu/AUD Vatu/USD INDEX 125 120 115 110 105 100 95 90 85 80 Dec-07 Dec-08 Dec-09 Dec-10 80 Dec-11 Weighing on the USD in December was a slight reversal in risk sentiment following the gains observed in previous periods in the face of growing uncertainty in the euro area.
Indicators from the US showed inflation remained subdued in recent months with longer term- inflation expectations stable.

Improvements were seen in overall labour market conditions alongside increases in household spending.

However, unemployment still remained elevated, while growth in business sector investment and the housing sector remained subdued, leaving questions over the sustainability of recent improvements and relative contributing weakening of the USD.
the to During the December quarter, the AUD appreciated against the vatu.

Contributing to this change is news that the Australian economy showed relatively strong 36 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 NO.
CHRONOLOGY OF MAJOR EVENTS BRIEF DESCRIPTION OF MAJOR EVENTS China’s Ambassador to Vanuatu, Cheng Shuping and Prime Minister of Vanuatu, Sato Kilman have signed and exchanged agreements for China to provide funding totaling VT300 million towards three Government priority projects namely the National Convention Centre, Extension to USP Emalus Campus and Extension to the Prime Minister’s Office.
(Source: Vanuatu Daily Post) Telecom Vanuatu Limited (TVL) announces sale of 50% of shares to Mauritius Telecom (MT).

Chief Executive Officer of Mauritius Telecom and Chairman of TVL Sarat Lallah confirmed the purchase of 50% of the shareholding of the leading telecommunications operator in the country, by MT International Ventures Ltd (MTIV), which is an investment vehicle wholly owned by Mauritius Telecom.
TVL is the only converged telecommunications operator in the country offering fixed, mobile and broadband services.
(Source: Vanuatu Daily Post) A one day mainstream trade meeting between UNDP Officials and Government Senior Trade Officials and Stake holders took place at the Holiday Day Inn, Port Vila on the 18th October as a practical response to meeting the challenge of ensuring that sustainable arrangements are in place to maximize the benefits from trade opportunities through integration into global and regional markets.
The meeting looked at the requirements for mainstreaming trade at the policy level in Vanuatu, institutional, which include Government and stake-holders and at the level of cooperation with development partners.

(Source: Vanuatu Daily Post) Unelco has successfully launched the use of SMART Refill Card Meter system to the population of one of the biggest village on Efate, Mele Maat, soon after the first pilot project village had proven successful.
The users of the SMART Refill Card system can monitor their electricity consumption through the SMART Refill Card System, and well management their own electricity consumption with efficiency.

(Source: Vanuatu Daily Post) Air Vanuatu announces introduction of a fourth Vila-Noumea service with its ATR-72 aircraft with the extra flight offering more options and better flight times for both inbound New Caledonia tourists (a growing market for Vanuatu) and Vanuatu locals looking for a quick break away.
Air Vanuatu now flies to Noumea on Mondays, Wednesdays, Fridays and Sundays.

(Source: Vanuatu Daily Post) Vanuatu becomes the second country in the region to launch its Human development Report.

The launching of the HDR took place 6th November 2011 by senior representative of the Prime Minister’s Office, and senior representative of UNDP.
The Report shows that Vanuatu’s Human Development Index (HDI) value for 2011 is 0.617 – placing the country in the medium human development category – and positioning at 125 out of 187 countries and territories, and 9th out of the 15th Pacific Island Forum Countries.

Between 2010 and 2011, Vanuatu’s HDI value increased from 0.615 to 0.617, an increase of about 0.3 percent.
(Source: Vanuatu Daily Post) The Government of New Zealand has agreed to increase the proportion of its aid to Vanuatu for the next 5 years.

This was part of an historical Development Joint Commitment agreement signed recently during the CHOGM meeting in Perth, Australia between Prime Minister Sato Kilman and New Zealand Foreign Minister, Murray Mc Cully.
The agreement aims to further strengthen the existing long time Development Cooperation cherished by the two countries with key priority areas including the private sector, development, shipping and other infrastructure, basic education, workforce training, and strengthening of governance.

(Source: Vanuatu Daily Post) Locally based Chinese company, Vanuatu Oil Palm Ltd assisted Santo farmers to tour oil palm plantations in Hainan Province, China in November.
The delegation comprised government officials and local farmers from Santo who are interested in learning more about oil palm.

The Vanuatu Oil Palm Ltd is a locally registered company that intends to farm oil palm o the island of Santo.

(Source: Vanuatu Daily Post) The Vanuatu Government has increased the budget of the Vanuatu Tourism Office (VTO) from VT139 million to VT200 million in its 2012 budget.
VTO will now be in a better position to promote Vanuatu abroad, in particularly singling out the two major tourist markets – Australia and New Caledonia, where we can fully utilize our resources to increase the momentum on tourists picking Vanuatu as their destination.
(Source: Vanuatu Daily Post) The recent passing of the Business License (Amendment) Act [CAP 249] by the Parliament, primarily addressing the lengthy process of issuing a business and other matters related to this process provides for a more internationally recognized accounting term in relation to the calculation of turnover tax paid by commercial banks under this act.
The Director of Customs is now obliged to issue a business license to a person within five working days from the data which that particular business entrepreneur receives his receipt of payment.
(Source: Vanuatu Daily Post) A three-day event workshop was organized by the Asian Development Bank (ADB) on project implementation for government officials with the belief that better project implementation will support inclusive and sustainable growth providing training on procurement of works, goods, and services, contract management, and disbursements as well as operational policies and procedures for ADB financed and administrative projects.
The project implementation workshop was officially opened in the week in Port Vila by the Director General of Finance, George Maniuri.

(Source: Vanuatu Daily Post) Vanuatu’s first National Industrial policy was launched by the Vanuatu Government through the Department of Industry and Commerce.
In collaboration between the Ministry of Trade, Commerce and Tourism and the United Nations Development Programme (UNDP), this milestone achievement was formulated within the past two months after a successful series of consultations with the private sector from the manufacturing industries, key government institutions and both primary and provincial authorities.

(Source: Vanuatu Daily Post) France has donated an amount of VT20 million for a number of development programs for 2012 ahead of the New Year.
The fund was presented to the Vanuatu Government through a signing agreement, which refers to the Partnership Framework document (DCP) signed between France and Vanuatu in 2006 which allows the Embassy of France to support initiatives of communications, associations or economic groups to access the funds for the development needs in the country as specified in the agreement.
The main areas targeted by the program are sustainable economic development, water and sanitation, education, health, social development projects and gender equity.

France has tripled the budget allocated to the development program for 2012 compared to 2011.
(Source: Vanuatu Daily Post) EFFECTIVE DATES 12th October 2011 15th October 2011 20th October 2011 1st November 2011 5th November 2011 7th November 2011 9th November 2011 17th November 2011 26th November 2011 3rd December 2011 3rd December 2011 10th December 2011 30th December 2011 37 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 1: ASSETS OF THE RESERVE BANK OF VANUATU (Millions of Vatu) End of Period Foreign SectorForeign Sector Public Sector Commercial Banks Other Assets Total Assets Foreign Exchange SDR Holdings RTP with IMF Total Claims on Claims on Claims on Total Com/Banks Government NFPE 2007 2008 2009 2010 2011 11,363.4 12,319.3 12,319.3 14,452.5 15,686.9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 r 1,272.7
1,419.4 1,518.5 1,242.6 1,240.0 1,193.7 1,272.7 802.9 733.3 731.4 620.8 620.1 619.7 619.9 618.5 621.0 620.7 1,417.9 1,419.4 1,369.2 1,517.9 1,517.6 1,518.5 - - 650.0 - - - - - - - - - 650.0 500.0 - - - - - - - - - - - 38 - - - - - - - - - - - 1,914.6
1,823.4 1,859.8 2,094.6 1,929.1 1,961.1 1,914.6 2,037.1 2,109.7 2,051.7 2,029.4 1,946.1 2,029.4 r r 14,141.4 15,130.9 15,780.9 18,564.2 12,791.4 13,061.4 13,292.3 14,141.4 13,466.1 13,559.1 14,303.0 15,780.9 15,182.2 15,303.9 18,594.0 17,101.9 17,568.3 18,043.2 18,766.9 18,564.2 18,591.9 18,916.7 19,083.6 19,806.6 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 2: LIABILITIES OF THE RESERVE BANK OF VANUATU (Millions of Vatu) End of Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Reserve Money Com/Bank's Vault Cash Currency outside Bank's Com/Bank's Deposits with RBV Total Foreign Government Deposits, Liabilities of which Contribution to RTP with IMF Deposits of NFPE RBV Notes Other Liabilities Total Liabilities r 3,569.9 3,756.4 3,916.5 4,553.3 4,885.7 2,918.6 3,202.2 3,309.3 3,569.9 3,281.0 3,674.2 3,690.9 3,756.4 3,249.5 3,563.3 3,663.6 3,916.5 3,545.2 3,924.1 4,178.1 4,553.3 4,162.3 4,557.5 4,693.8 4,885.7 r - - - - - - - - - - 2,518.7 3,441.3 3,057.7 2,756.4 2,823.9 2,184.8 2,316.4 2,322.4 2,518.7 2,646.1 2,749.6 3,244.8 3,441.3 3,869.9 3,647.8 3,128.6 3,057.7 3,156.9
1,144.6
QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 3: ASSETS OF COMMERCIAL BANKS Reserves Deposits with RBV RBV Notes Total Foreign Assets 1/ Domestic Credit Claims on Claims on Government Municipalities Claims on NFPE End of Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Vault Cash r 4,187.1 4,273.3 3,283.2 4,109.9 4,143.7 4,138.9 5,367.2 4,593.7 5,263.1 5,283.5 4,874.8 4,724.3 r 5,560.9 5,308.7 5,236.4 5,521.0 5,504.1 6,603.5 6,995.1 5,447.9 5,311.3 4,706.3 5,236.4 4,783.0 4,396.2
18,185.1
25,751.9 22,778.2 21,780.6 19,297.0 18,185.1 18,024.3 16,198.7 1/ Includes small amounts of claims on foreign monetary authorities in the form of foreign currency notes and coins.
r. Revised.
(Millions of Vatu) Other Assets Total Assets Inter-bank Claims Total Claims 23,432.0 33,335.4 39,840.8 44,754.7 49,486.8 21,766.9 22,435.4 22,624.6 23,432.0 26,204.9 29,111.8 31,541.2 33,335.3 36,367.2 37,274.7 38,707.6 39,840.8 40,959.1 42,372.3 43,273.2 44,754.7 45,610.4 46,722.0 47,993.9 49,486.8 - 61.4 - - - - Claims on Private Sector 22,860.1 32,768.3 39,282.6 43,857.3 47,856.3 21,089.8 21,862.6 22,053.0 22,860.1 25,553.4 28,201.2 30,968.6 32,768.3 35,841.6 36,715.8 38,152.0 39,282.6 40,257.3 41,571.2 42,473.3 43,857.3 44,722.9 45,639.7 46,809.3 47,856.3 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 4:
 LIABILITIES OF COMMERCIAL BANKS Demand Deposits Savings Deposits Time Deposits End of Period Local Currency Foreign Currency Total Local Foreign Currency Currency Total Local Currency Foreign Currency Total (Millions of Vatu) Foreign Liabilities Government Deposits Other Liabilities Total Liabilities 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 r 7,210.6 7,690.7 7,625.2 9,494.3 9,700.7 6,164.9 6,714.9 7,234.0 7,210.6 7,230.9 8,151.2 8,201.9 7,690.7
10,854.1
249.8
r 2/ Government deposits in Vatu and Foreign currency.
r. Revised.

41 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 5 : MONETARY SURVEY: A CONSOLIDATED STATEMENTS OF ACCOUNTS OF THE MONETARY INSTITUTIONS DOMESTIC CREDIT Claims on NFPE 2/ 'Claims on Private Sector 3/ 'Claims on Govt.
(Net) (Millions of Vatu) Claims on Municip- alities Total Domestic Credit r r r r r (1,110.3) (3,009.9) (2,970.9) (1,183.0) (712.6) (815.7) (859.2) (890.5) (1,110.3) (1,571.1) (1,914.9) (2,369.6) (3,009.9) (3,606.6) (3,378.3) (2,982.3) (2,970.9) (3,280.9) (3,211.3) (2,407.9) (1,183.0) (1,334.0) (1,436.1) (1,107.5) (712.6) r 39,358.7 r 39,981.7 41,001.3 42,338.0 42,559.7 r 43,957.1 44,826.0 44,293.2 46,912.1 47,963.3 r NET FOREIGN ASSETS(NFA) 'Commercial Banks Foreign Assets Foreign Liabilities r 7,874.8 8,298.8 8,631.9 8,675.5 r 6,591.4 7,366.9 8,540.9 10,438.2 11,071.4 12,210.7 12,226.1 11,357.5 10,933.8 10,550.6 9,867.0 Net 11,622.7
 12,814.2 11,599.7 12,321.1 13,781.2 10,720.8 10,827.8 10,890.8 11,622.7 11,469.1 11,464.6 11,688.3 12,814.2 12,075.2 12,196.9 12,470.1 11,599.7 12,280.0 12,694.7 12,596.9 12,321.1 12,662.5 12,901.9 13,072.1 13,781.2 End of Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Foreign Assets 11,939.5 12,979.0 14,554.3 15,035.1 16,258.7 10,988.9 11,051.2 11,241.7 11,939.5 11,745.0 11,827.3 12,300.1 12,979.0 r 12,238.7 12,824.4 15,879.5 14,554.3 14,986.2 15,507.9 15,312.0 15,035.1 15,171.1 15,369.3 15,619.8 16,258.7 'Monetary Authorities Foreign Liabilities 316.8 164.8 2,954.7 2,714.1 2,477.4 268.1 223.4 350.9 316.8 275.9 362.7 611.8 164.8 163.4 627.5 3,409.3 2,954.7 2,706.2 2,813.2 2,715.0 2,714.1 2,508.6 2,467.4 2,547.7 2,477.4 2/ Including claims on Vanuatu Commodities Marketing Board (VCMB).
3/ Including claims on RBV staff and excluding credit corp Total NFA 37,497.0 40,877.6 33,409.0 21,875.5 20,112.9 32,028.9 32,968.2 34,645.5 37,497.0 37,989.5 40,036.0 38,068.5 40,877.6 35,031.5 34,595.7 35,480.8 33,409.0 29,942.0 27,375.1 23,164.5 21,875.5 20,602.0 20,153.2 20,545.8 20,112.9 Net 25,874.3 28,063.4 21,809.4 9,554.4 6,331.7 21,308.1 22,140.4 23,754.7 25,874.3 26,520.4 28,571.4 26,380.2 28,063.4 22,956.3 22,398.8 23,010.6 21,809.4 17,662.0 14,680.4 10,567.5 9,554.4 7,939.5 7,251.3 7,473.7 6,331.7 42 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 5 : MONETARY SURVEY: A CONSOLIDATED STATEMENTS OF ACCOUNTS OF THE MONETARY INSTITUTIONS….continued End of Period Money Currency Demand deposits outside Banks L currency F currency Liquidity Total Quasi-money Time & Sav.
deposit( F C) Time & Sav.
deposit(VT) Total (Millions of Vatu) Total Liquidity OTHER ITEMS (Net) 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 38,467.3
2/ Including claims on Vanuatu Commodities Marketing Board (VCMB).
3/ Including claims on RBV staff and excluding credit corp 43 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 6: DOMESTIC MONEY SUPPLY AND COMPONENTS (Millions of Vatu) End of Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Notes Coins Total (1) (2) (1+2) (3) Demand Demand Deposits M1 Currency Deposits of Cash in hand with Public Residents in Vatu with in Vatu (D dV) 1/ (3-4) Banks ( 6 ) ( 5 ) ( 4 ) of Residents in foreign currency (DdF) 2/ ( 7 ) (Narrow Measure) (5+6+7) ( 8 ) Savings & Time Deposits of Residents in Vatu (T dV) ( 9 ) 4,885.7
M2 Savings & Time Deposits of Residents in (Broad foreign currency Measure) (8+9+10) ( 11 ) (TdF) ( 10 ) 1/ Excludes deposits of Government but includes Vatu deposits on non-reporting (i.e
 exempt) banks and other institutions held with reporting banks.
2/ Excludes Government deposits and deposits of exempt institutions.
44 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 7: DISTRIBUTION OF VATU AND FOREIGN CURRENCY DEPOSITS OF RESIDENTS BY CATEGORIES End of Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Vatu Deposits(MVT) 1/ 'Foreign currency Deposits (MVT) 1/ Demand Savings Time Total Demand Savings Time Total Percent Distribution ( % ) Total Vatu Foreign Deposits Currency Deposits Government Depostis (MVT) 2/ 280.8
1/ Excludes deposits of the Vanuatu Government.
2/ Government deposits in Vatu and Foreign currencies.
45 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 8: TIME DEPOSITS IN VATU OF RESIDENTS WITH COMMERCIAL BANKS (Millions of Vatu) End of Up to and incl- Over 7 days and Period and up to 1 month usive of 7 days 1 to 2 Months Maturity Period 2 to 3 Months 3 to 6 Months 6 to 12 Months Over one Year Total 2/ 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 5,966
QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 9: COMMERCIAL
 BANKS SECTORAL DISTRIBUTION OF LOANS & ADVANCES IN VATU AND FOREIGN CURRENCY (Millions of Vatu) End of Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Agriculture Fisheries Mining & Manufact- Tourism Quarrying turing Entertain- ment & Catering Transport Public Utilities Construc- tion (a) Govern- ment (b) Public Corporation - 1,564.7
r r 0.1 22.5 5.1 9.9 29.8 0.2 0.2 0.3 0.1 2.0 2.1 0.2 0.2 4.6 1.4 7.4 5.1 1.3 2.4 3.8 9.9 2.3 1.1 4.7 29.8 r r r r 32.2 22.3 37.5
 18.0 21.0 37.0 37.7 34.9 32.2 22.8 31.9 39.3 20.4 25.3 25.0 6.3 37.5 27.7 24.4 24.4 18.0 24.0 17.6 21.3 21.0 1/ Non-reporting banks includes Trust companies, Insurances etc.
47 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 9: COMMERCIAL BANKS SECTORAL DISTRIBUTION OF LOANS & ADVANCES IN VATU AND FOREIGN CURRENCY ….continued (Millions of Vatu) End of Period Financial Institutions Professional & Other Services Housing & Land Purchases Distribution Personal: Others Miscella- neous TOTAL Of which: Vatu Private Government shares & Bonds Bonds Claims on non-repor- ing banks GRAND TOTAL 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1/ Non-reporting banks includes Trust companies, Insurances etc.
- - - - - - - - - - - - - - - - - - - - - - - - - - 488.0 482.4 434.5 786.3 1,186.7 588.0 488.0 488.0 488.0 567.9 473.6 483.1 482.4 434.5 434.5 434.5 434.5 587.0 686.7 686.7 786.3 786.3 986.3 1,086.3 1,186.7 - - - - - - - - - - - - - - - - - - - - - - - - - - 23,854.1 34,074.4 42,224.8 45,330.4 49,790.5 21,960.4 22,683.0 22,924.0 23,854.1 26,677.5 29,429.0 32,275.8 34,050.1 37,070.9 37,937.0 40,667.2 42,224.8 41,809.1 43,214.2 43,984.7 45,330.4 45,751.7 46,863.8 48,255.1 49,790.5 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 10: DISTRIBUTION OF VATU ADVANCES BY INTEREST RATES AS AT END OF DECEMBER 2011 (Millions of Vatu) RATE OF INTEREST ( % ) Agriculture & Fisheries Mininig &
 Manufacturing Other Productive Sectors Distribution, Trade & Housing & Land Purchase for 0ther Sectors Owner occupation Other Personal Total Below At At Above 8.00 8.00 8.50 9.00 9.50 10.00 10.50 11.00 11.50 12.00 12.50 13.00 13.50 14.00 14.50 15.00 15.50 16.00 16.50 17.00 17.50 18.00 18.00 TOTAL 0.6 - - - 52.8 0.1 0.2 - 80.3 43.0 - 4.7 0.0 3.7 - 0.0 0.0 0.0 - 0.0 0.0 - 1.8 187.2 0.4 1.7 - - 0.8 0.1 0.0 70.1 0.0 14.1 0.0 83.5 0.0 0.0 0.0 - - 0.0 0.0 0.0 0.0 - - 0.2 170.6 0.4 2,149.7 197.4 0.0 60.7 340.8
 0.2 206.3 54.0 1,417.6 48.1 1,075 10.4 7.9 1.9 - - 0.2 0.0 0.0 0.0 0.0 0.0 23.2 5,593.3 12.6 22,027.6 593.9 0.0 445.8 1,015.7 0.4 55.6 74.4 560.0 17.9 336 62.7 0.1 37.4 - 0.0 2.6 54.3 0.0 0.0 0.0 0.0 1.2 25,285.1 57.0 49 7,574.7 174.0 0.2 0.5 1,919.3 14.2 7.8 0.3 9.6 0.3 367 0.1 0.1 1.9 - 4.9 0.1 0.0 2.0 - 0.1 0.0 1.5 10,078.6 22.7 524.1 7.2 0.0 1.0 167.5 0.2 87.5 6.7 576.3 7.0 1,218 27.9 6.1 152.2 - - 0.1 24.2 0.0 25.6 0.0 0.0 197.8 3,029.0 6.8 32,278.3 972.5 0.3 508.7 3,496.2 15.1 427.5 135.4 2,657.9 116.3 3,078.7 105.9 14.2 197.2 - 4.9 3.0 78.5 2.1 25.6 0.1 0.0 225.5 44,343.7 100.0 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 11: SELECTED INTEREST RATES FOR LOCAL COMMERCIAL BANKS 1/ End Period 2007 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Vatu Deposit Rates 2-6 Months Above 6 months Weighted average rate for Fixed deposits Weighted average rate for Bank deposits Savings 1 month Foreign Currency Deposit Rates (Aust.
Dollar) 1 month (Locally quoted) Vatu Advance Rates 2/ Commercial Personal Housing Weighted average rate for bank loans Local Inter-Bank Rates Call or Overnight 0.50-2.00 1.25-3.50 1.25-4.50 0.50-3.00 1.25-9.00 1.25-9.00 1.25-8.00 1.25-8.00 0.5-5.00 0.5-3.00 1.50-6.00 1.50-6.50 0.50-2.00 1.25-3.75 1.25-4.25 0.50-2.00 1.25-3.50 1.25-4.25 0.50-2.00 1.25-3.50 1.25-4.50 0.50-2.00 1.25-3.50 1.25-4.50 2.25-5.50 2.25-9.00 2.25-9.80 2.50-9.00 2.25-4.25 2.25-4.25 2.25-4.50 2.25-5.50 0.50-3.00 1.25-5.45 1.25-5.75 0.50-3.00 1.25-5.60 1.25-6.95 0.50-3.00 1.25-7.25 1.25-7.50 0.50-3.00 1.25-9.00 1.25-9.00 2.25-5.75 2.25-7.00 2.25-9.09 2.25-9.00 0.50-3.00 1.25-8.00 1.25-8.45 0.50-3.00 1.25-8.00 1.25-8.45 1.25-8.00 1.25-8.45 0.5-5.00 1.25-8.00 1.25-8.00 0.5-5.00 2.25-9.80 2.25-9.80 2.25-9.80 2.25-9.80 0.5-5.00 1.25-8.00 1.60-8.45 0.50-5.00 1.50-7.50 1.60-7.00 1.50-7.50 1.60-7.01 0.5-5.00 1.50-6.00 1.50-6.50 0.5-3.00 2.50-9.80 2.50-9.80 2.50-9.81 2.50-9.00 0.5-3.00 0.5-5.00 0.5-5.00 0.5-5.00 1.50-8.00 1.50-8.00 1.50-5.75 1.50-6.00 1.50-5.75 1.75-6.00 1.50-7.50 1.50-7.30 2.50-8.00 2.50-8.00 1.75-8.02 2.50- 3.50-5.50 2.50-5.85 1.80-4.40 2.29-4.80 3.50-5.50 3.50-5.50 3.50-5.50 3.50-5.50 4.00-7.20 4.00-6.90 3.00-6.85 2.50-5.85 2.00-3.40 2.00-2.90 2.00-2.84 1.80-4.40 1.80-4.16 1.75-4.50 1.75-4.50
 2.29-4.80 2.25-4.77 2.75-4.57 2.29-4.83 2.75-5.17 9.00-18.50 14.50-25.00 7.00-10.75 5.93-18.50 4.50-21.50 5.50-12.00 9.50-23.00 5.50-26.50 8.99-13.00 8.95-23.00 5.50-21.50 8.90-11.99 11.00-18.5014.50-25.008.75 (r )-14.75 11.00-18.5014.50-25.00 8.45-14.75 11.00-18.5014.50-25.00 8.45-14.75 9.00-18.50 14.50-25.00 7.00-10.75 10.31 10.33 10.92 10.99 11.63 10.49 10.49 r 10.31 8.95-18.50 10.00-21.50 7.00-10.75 7.50-18.50 4.50-21.50 6.90-8.95 6.99-18.50 4.50-21.50 4.50-10.75(r) 5.93-18.50 4.50-21.50 5.50-10.75 8.50-19.50 5.50-21.50 5.50-12.00 9.50-19.50 5.50-21.50 8.99-13.00 9.50-19.50 5.50-26.50 8.99-13.00 9.50-23.00 5.50-26.50 8.99-13.00 8.90-13.00 8.90-13.00 5.5-26.5 8.95-23.00 5.50-26.50 8.90-13.00 8.95-23.00 5.50-26.50 8.90-13.00 8.95-23.00 5.50-21.50 8.90-11.99 8.95-23.00 9.99-26.50 8.95-11.99 7.00-23.00 5.50-20.90 8.75-13.00 7.00-23.00 5.50-26.50 8.45-13.00 7.00-23.00 5.50-26.50 8.45- Source: Local Commercial banks returns: 1/ From (Qtr 3, 2002) Data covers 2 out of 3 banks (2 banks merged).
From Qtr 4 2003 data covers all commercial banks.

From Qtr4, 2007 to date, data covers 4 commercial banks 2/ Interest rates relating to vatu advances ranging from the minimum 4.5-5.5 percent also reflect rates offered to their staff.
r: Revised 50 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 12: DENOMINATIONS OF CURRENCY ON ISSUE VT100 VT200 Notes VT500 174.3 230.8 211.9 246.4 272.3 147.7 154.4 156.0 174.3 184.1 184.1 226.9 230.8 205.9 204.9 203.8 211.9 198.7 209.9 224.6 246.4 238.3 244.7 246.6 272.3 End of Period 2007 2008 2009 2010 2011 2007 Q1 Q2 Q3 Q4 2008 Q1 Q2 Q3 Q4 2009 Q1 Q2 Q3 Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 r. Revised ( Millions of Vatu ) VT1,000 VT5,000 Total & Coins Coins Total Notes r r 2,198.5
6,071.0 1,777.4 1,728.2 1,815.6 2,044.4 2,198.5 1,243.5 1,350.8 1,428.2 1,777.4 1,461.8 1,461.8 1,673.6 1,728.2 1,398.5 1,509.7 1,584.4 1,815.6 1,546.3 1,702.5 1,834.2 2,044.4 1,843.5 1,960.9 2,043.0 2,198.5 51 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 13: NET OFFICIAL RESERVES 1.
Net Official Reserves Foreign Special Exchange of RBV Drawing Rights Position in IMF (2) Reserve (1) (3) (Millions of Vatu) 2.
Net Foreign Assets of Commercial Banks Foreign Liabilities (8) Foreign Assets (7) Net Position (7-8) (9) Total Holdings (1+2+3) (4) Foreign Liabilities (5) Net Position (4-5) (6) End of Period 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 r 350.9
14,986.2
12,238.7 12,824.4 15,879.5 14,554.3 14,986.2 15,507.9 15,312.0 15,035.1 15,171.1 15,369.3 15,619.8 16,258.7 52 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 14: RESERVE BANK NOTES ISSUED IN PRIMARY MARKET Date of Issue Period of Date of Original MaturityMaturity Amount Issued (Million VT) Float Received Accepted Notes Weighted Average Yield Outstanding of Accepted Yields Received Maturities(Million Vatu) 1/ Range of (MVT) Tenders 1 1 1 1.25 1.4 650 620 560 385 385 2600 Mar-10 7 days 14 days 28 days 63 days 91 days Total Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 7 days 14 days 28 days 63 days 91 days Total 7 14 28 63 91 Total 7 14 28 63 91 Total 7 14 28 63 91 Total 7 14 28 63 91 Total 7 14 28 63 91 Total 7 14 28 63 91 Total 3.25
1.5 1.6 1.95 2 2.15 1.5 1.6 1.8 2 2.1 2.95 3.25 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 15: COMMERCIAL BANK'S LIQUIDITY End of Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Vault Cash Liquid Assets Deposits with RBV (Excess Reserves) (1) (2) Total (1+2) (3) (Millions of Vatu) Total Statutory Reserve Deposits (SRD) RBV Notes (4) (5) (3+4+5) (6) 1,118.7 1,247.7 1,365.2 1,320.0 1,686.4 522.3 517.7 618.7 1,118.7 972.5 954.9 879.2 1,247.7 1,008.9 974.4 851.8 1,365.2 994.5 969.4 1,038.3
r r QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 16: DOMESTIC BANKS CONSOLIDATED CAPITAL - 1/ (Thousands of Vatu) End of Paid-Up Period Capital Audited Retained Earnings (losses) 2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 2007 2008 Q1- 2/ Q2- 2/ Q3- 2/ Q4- 2/ 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 860,000 856,000 3,478,000 3,471,000 3,468,000 859,000 858,000 857,000 856,000 2,523,000 2,522,000 2,527,000 3,478,000 3,479,000 3,474,000 3,471,000
1/ Excluding branches of foreign banks 2/ Revised 3/ Impared assets 4/including branches of foreign banks TIER 1 TIER 2 TOTAL Less CAPITAL Other Less Less TOTAL Unaudited
 Asset General Provisions Term subordinated TOTAL TIER 1 holdings BASE 2/ goodwill etc Unaudited Losses 2/ Profits 2/ TIER 1 CAPITAL 1/ revaluation reserves for doubtful depts Eligible Q1 20011 2/ dept etc.
Gross Eligible TIER 2 CAPITAL & TIER 2 1/ 1/ 1/ of other banks capital instruments - - (124,000) (124,000) - - - 188,074 224,172 217,000 329,000 329,054 190,325 201,369 214,017 224,172 233,217 241,733 256,511 217,000 309,606 305,078 321,879 329,000 326,000 326,000 328,000 329,054 412,054 430,054 438,059 421,259 47,970 (1,000) 47,970 (2,000) (1,000) (2,000) (1,000) (2,000) (1,000) QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 16: DOMESTIC BANKS CONSOLIDATED CAPITAL -
 1/…..continue (Thousands of Vatu) Total risk ASSETS QUALITY - 4/ End of weighted 1 Asset Quality Total Total risk Restructured Non-accrual 2 Provisioning Period assets 4/ Standard Substan- dard Doubtful (D) Loss (L) lending losses weighted assets 1/ items items (D+L) 3/ Provisions (specific) Provisions (General) Security 2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 2007 2008 Q1- 2/ Q2- 2/ Q3- 2/ Q4- 2/ 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 24,437,710 26,051,753 35,709,605 39,052,685 41,366,323 24,603,827
16,565,827
206,534
1/ Excluding branches of foreign banks 2/ Revised 3/ Impared assets 4/including branches of foreign banks 56 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 17 : INTERNATIONAL BANKS - BALANCE SHEET (A) TOTAL ASSETS 1 CASH ITEMS 2 MARKET SECURITIES (up to 1 yr.
Original Maturity) Cash r/ Balances Gold and & CDs issued by banks Silver Bullion Cash items in process of collection TOTAL Zone A: Bank securities Zone A: Other public sector TOTAL Other securities Public Sector Banks r/ End of Period 2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 r/ - revised r/ - - - - - 12 12 - - - - - 1,102 1,318 2,269 3,107 2,891 2,755 1,102 1,318 2,269 3,107 2,891 2,755 57 (Thousands of Vatu) 3 LOANS & ADVANCES Other loans & advances r/ - - 18,347 16,884 47,769 32,825 25,854 27,992 28,454 24,584 22,103 20,796 24,653
 23,828 TOTAL 103,701 60,590 43,072 44,399 30,634 63,075 100,326 64,070 60,590 58,984 56,790 46,880 43,072 32,306 30,121 62,611 44,399 34,911 34,029 34,756 30,634 33,264 30,883 24,653 23,828 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 17: INTERNATIONAL BANKS - BALANCE SHEETS (A) ….
continue TOTAL ASSETS (Thousands of Vatu) End of Period 2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 r/ - revised 4 INVESTMENTS (Over 1 yr Original Maturity for dept instrument) TOTAL Other Equities Institutions Securities Zone A: Affiliated Other Public Sector & Bank Securities 501,796 502,084 500,532 500,333 7 501,916 504,519 502,143 502,084 502,212 501,297 501,195 500532 500,305 500,324 500,336 500,333 500,309 6 7 7 7 7 7 7 - 2,807 2,727 5,697 2,813 - 3,057 2,807 2,716 2,675 2,638 2727 5,481 5,568 5,700 5,697 5,885 5,885 - - - - - - 6,030 5,818 44 44 44 44 44 44 44 - - 0 501,840 504,935 503,259 506,030 7 504,773 504,563 505,244 504,935 504,972 503,972 503,833 503,259 505,786 505,892 506,036 506,030 506,194 5,891 7 7 7 7 6,037 5,825 58 6 TOTAL ASSETS TOTAL 5 OTHER ASSETS Accured interest receivable r/ Other assets r/ Equipement & other fixed assets(net of accumulated depreciation) - 84,273
87,130 85,789 106,431 77,502 72,246 66,783 84,273 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 18: INTERNATIONAL BANKS - BALANCE SHEET (B) TOTAL LIABILITIES 1 DEPOSITS 2 TERM DEPT AND OTHER BORROWINGS End of Period Banks Corpora- tions r/ Trusts Individuals Negotiable certificates of deposits Other TOTAL Other notes & bonds Unsecured subordinated dept (over 5 yrs original term maturity) TOTAL Other borrowings (including loans, overdrafts, commercial papers) 17,948 89,849 98,298 10,102 420,790 389,006 6,227 370,087 10,006 377,698 9,613 450,559 8,194 385,115
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 r/- revised QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 18: INTERNATIONAL BANKS - BALANCE SHEET (B) … continue TOTAL LIABILITIES End of Period 2004 2005 2006 2007 2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 r/- revised 2007 2008 2009 2010 2011 3 ACCRUED LIABILITIES Accrued interest payable r/ Dividend payable Other accured expenses r/ 4 OTHER LIABILI- TIES TOTAL 5 LOSS RESERVES TOTAL General loan loss reserves Other loss reserves 6
 TOTAL LIABILI- TIES 8 TOTAL 9 TOTAL LIABILITIES & SHARE- HOLDERS EQUITY 7 SHAREHOLDERS EQUITY Issued & fully paid up common Additional Unappro- Current year's priated paid up net retained capital in income/ earnings stock (at par excess of (loss) par or or norminal r/ nominal r/ value) value Perpertual on-comulative issued & fully paid up preference share 25 68 56 35 6 75 35 35 4 10 0 641r 165
-616 1,375 567 423 230 515 718 567 298 356 -144 423 163 846 1,047 976 713 125 168 207 34 72 -100 - 699,304
700,022 691,629 687,530 684,714 686,439 699,304 743,606 629,074 603,941 87,130 85,789 106,430 77,497 72,424 66,783 84,800 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 19: DOMESTIC BANKING INDUSTRY FOREIGN EXCHANGE TURNOVER AGAINST VATU CURRENCY FOREIGN EXCHANGE TURNOVER AGAINST VATU CURRENCY (VT '000') End of Period OUTRIGHT SPOT Resident Dealers Overseas Banks Resident Customers Non-resident Customers 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 79,100 145 206,256 76,438 135,792 624,745 140,931 55,812 1,013,431
FOREIGN EXCHANGE TURNOVER AGAINST USD CURRENCY (VT '000') Internal Transac- tions 257,439 205,971 0 244 489 408 1443 Total Resident Dealers Overseas Banks OUTRIGHT FORWARD Resident Non-resident Customers Customers Internal Transactions Total Resident Dealers Overseas Banks Resident Customers Non-resident Customers Internal Transactions Total SWAPS - - - - - - - - - Total FX turnover against Vatu 1,933,623 2,289,776 4,499,804 3,212,893 3,515,884 5,878,769 7,842,548 4,447,259 6,503,084 4,966,049 6,122,775 5,779,092 4,794,491 5,189,562 5,417,310 5,930,815
 4,236,116 5,074,240 7,744,407 5,169,856 End of Period OUTRIGHT SPOT Resident Dealers Overseas Banks Resident Customers Non-resident Customers Internal Transac- tions Total Resident Dealers Overseas Banks OUTRIGHT FORWARD Resident Non-resident Customers Customers Total Internal Transactions Resident Dealers Overseas Banks Resident Customers Non-resident Customers Internal Transactions Total SWAPS 2007 Q1 Q2 Q3 Q4 2008 Q1 Q2 Q3 Q4 2009 Q1 Q2 Q3 Q4 2010 Q1 Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 2765 80,000 7,325 3935
Q2 Q3 Q4 2011 Q1 Q2 Q3 Q4 - - - - - - - - - - - - - - - - - Total FX turnover against USD 528,763 447,352 714,285 999,426 1,765,701 724,194 1,093,952 1,300,789 1,240,171 501,314 786,603 908,186 602,386 334,025 525,591 533,939 565,339 992,600 947,052 828,812 TOTAL FX TURNOVER AGAINST VATU & USD 2,462,386 2,737,128 5,214,089 4,212,319 5,281,585 6,602,963 8,936,500 5,748,048 7,743,255 5,467,363 6,909,378 6,687,278 5,396,877 5,523,587 5,942,901 6,464,754 4,801,455 6,066,840 8,691,459 5,998,668 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 20: DOMESTIC BANKING INDUSTRY CORE SET OF FINANCIAL SOUNDNESS INDICATORS (%) DEPOSIT - TAKING INSTRUMENTS 2 ASSET QUALITY Nonperform- Nonperform- loans net of provisions to capital loans to total gross loans 1 CAPITAL ADEQUACY Regulatory Tier 1 Capital to risk - Weighted
 assets 1/ r/ 2011-Q2 Regulatory Capital to risk - Weighted assets 1/ r/ 2011-Q2 3 EARNINGS & PROFITABILITY Return on Return on equity (ROE) assets (ROA) r/ r/ 2010-Q4 2010-Q4 r/ Interest margin to gross income Noninterest expenses to gross income End of Period 2005 2006 2007 2008 Q1 Q2 Q3 Q4 2007 2008 Q1 - r/ Q2 Q3 Q4 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 26.7 33.5 29.8 36 29.6 29.6 28.1 29.8 39.0 36.3 37.0 36.0 37.1 37.1 36.5 33.7 34.0 34.6 31.0 30.6 19.5 22.0 21.2 21.3 25.6 32.3 28.6 35 28.4
5.6r 1/ - Excluding branches of foreign banks 2/including foreign branches r - revised 4 LIQUIDITY Liquid assets to total assets 17.2 25.8 18.8 18.6 24.6 21.6 20.8 18.8 16.6 15.3 11.9 18.6 17.6 16.1 17.9 16.5 19.3 19.3 16.1 16.5 16.8 17.6 17.3 18.2 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 21: DOMESTIC BANKING INDUSTRY PROFIT PROFIT End of Period Interest income 1 INCOME Non-interest income Interest Expense Total Operating Income 2 EXPENSES 3 PROFIT & LOSS STATEMENT Total Operating expenses Net Interest Income Operating Profit before tax, write-offs & provisions Operating Expenses (Excluding bad depts & provision charges Provisions General Reserves Extraordinary Items Bad Depts Written-off Bad-depts recovered Net Operating
 Profit 2005 2006 2007 2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1,807,844
(691) 3,134 2,521 (7,871) 15,934 61,934 23,863 7,173 209 - 3,317 25,128 12,976 32,990 32,990 1,851 1,851 1,234 12,773 4,296 1,100 20,237 16,563 750 5,000 - - 563,072 566,568 617,235 739,097 567,990 649,059 589,934 617,235 636,186 655,971 671,434 739,097 608,030 737,692 819,458 789,006 764,993 781,066 836,966 832,990
 803,201 837,169 789,281 817,033 63 (1,336) (7,488) (9,082) (110,071) (6,654) (19,865) 1,734 (9,082) (41) (12,722) 409,762 (110,071) 7,310 (160,157) (84,987) 97,148 74,858 (32,921) 58,183 119,909 81,106 26,102 987,461 112,913 586,995 550,754 690,185 71,700 562,357 609,313 434,741 690,185 - 456,130 515,572 74,246 717,040 431,193 780,195 883,489 428,111 460,251 550,396 534,239 623,216 456,029 526,487 (724,153) 400,348 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 22: VANUATU GOVERNMENT FISCAL OPERATIONS
 (Millions of Vatu) TOTAL REVENUE AND GRANTS EXPENDITURE AND NET LENDING Items 2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Domestic Revenue Tax Revenue Non Tax Revenue Grants from Abroad TOTAL 10014.7 12032.7 16623.8 16824.5 16997.1 2770.6 2900.8 3079.2 3282.1 3180.9 4652.5 4575.1 4215.2 3611.6 4519.9 4309.5 4383.5 4448.0 4841.7 4106.8 3600.7 4376.5 3577.2 3928.1 3423.2 Source: Department of Finance Recurrent Expenditure Lending minus Repayments Non-recurrent transfer to Gov.
bodies Development Expenditure TOTAL DEFICIT / SURPLUS 205.6 69.7 1318.4 36.1 -1835.4 381.2 -223.4 123.6 -211.7 12.1 289.2 793.8 223.3 903.6 588.4 -24.8 -1431.1 370.5 -317.2 -358.7 -1529.9 174.1 -820.2 -356.6 -523.6 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 23: GOVERNMENT REVENUE CLASSIFIED BY MAJOR SOURCES TOTAL REVENUE Items AND GRANTS Total Recurrent Revenue Tax Revenue Other Total Taxes on Use of Goods Business Licenses Value Added Tax Turnover Tax Tax on International Trade Import duties Total Export duties Total Property Tax Property income Dividents (Millions of Vatu) Non Tax Revenue Admin.
fees & Charges Other Other Property income Total Sale of Fixed Capital Asset Grants from abroad 2004 2005 2006 2007 2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Source : Department of Finance 64.7
133.0 158.0 146.9 181.8 134.9 221.2 150.7 64.7 148.5 99.3 113.5 133.3 137.5 101.1 86.9 96.4 130.4 116.8 6,621.8 6,961.2 8,120.9 9,847.3 11,444.3 # # # # # 2,416.9 2,305.1 2,431.0 2,694.2 2,910.9 2,685.2 2,874.8 2,973.3 2,991.2 2,362.8 2,713.4 2,803.5 2,930.4 2,285.4 2,828.9 2,820.4 3,154.8 2,629.4 3,088.6 2,796.4 83.2 207.6 199.3 273.8 233.8 35.0 29.4 20.0 189.4 - 36.6 233.8 (36.7) 10.2 - 410.5 20.0 - 55.0 - - - - 50.0 70.0 73.4 140.8 143.0 153.4 133.4 1.0 2.6 145.7 4.1 1.2 1.6 135.0 (4.5) 2.2 1.1 133.8 3.0 (0.5) 4.1 139.0 3.0 2.4 4.3 143.0 3.3 63.9 23.4
(0.5) (0.1) 0.6 10.4 2.4 0.4 0.3 1.4 4.1 4.1 (1.0) - - 5.7 6.7 0.9 7.2 (0.5) QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 24: GOVERNMENT EXPENDITURE CLASSIFIED BY MAJOR CATEGORY Goods and o/w Wages& Salaries 4098.8 4230.7 5161.8 6366.7 7044.6 1331.8 1746.2 1472.5 1816.2 1509.3 1847.5 1683.1 2004.7 1464.0 1900.6 1701.0 2096.3
 1549.3 1966.2 1794.3 2362.4 629.4 2039.5 2080.1 2059.5 TOTAL EXPENDITURE Items 2004 2005 2006 2007 2008 7915.0 7943.2 9809.1 11963.0 15305.4 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2389.4 3124.2 2955.6 3493.9 3168.8 4363.3 3781.3 3992.0 2707.9 3931.5 4334.3 5814.6 3982.6 4622.1 4465.5 5130.6 1341.4 4397.3 4284.7 3946.7 Source : Department of Finance Recurrent Expenditure Interest payments Domestic External Total Services Total Subsidies and transfers o/w Provinces &
 Municipalities - Acquisition of fixed capital assets 169.1 Lending minus repayments 0.0 Total Recurrent Expenditures 7331.4 Non-recurrent transfers to Gov.bodies 0.0 Total Development Expenditure 738.6
225.6 291.5 123.4 1312.5 1031.4 922.1 467.3 738.6 958.9 2226.8 1044.6 1164.6 1230.8 967.5 191.7 703.6 945.2 504.3 Total 1160.5 893.6 1059.3 1108.6 1209.2 295.2 295.6 270.3 247.5 373.8 324.4 318.1 192.9 184.0 317.9 532.4 276.2 334.0 469.7 393.3 230.1 221.9 474.0 433.1 465.2 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 25: VANUATU GOVERNMENT OUTSTANDING BONDS (Thousands of Vatu) Period Ended Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 BOND HOLDERS Reserve Bank of Vanuatu Commercial (1).
Banks Public Corporation Others Total Outstanding QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 26: EXCHANGE RATES Period (Yr/Mth) 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Australian Dollar 96.54
94.72 92.89 94.49 94.88 96.73 95.80 95.45 96.54 95.06 92.24 96.00 94.05 94.91 EXCHANGE RATES: VATU PER UNIT OF FOREIGN CURRENCIES End of Period Rates Averages US Dollar 88.93
93.88 93.09 91.89 88.52 89.64 89.39 87.72 88.93 94.32 89.60 93.77 93.56 ECU / Euro Australian Dollar NZ Dollar US Dollar 103.15 101.67 105.91 97.16 94.61 107.24 107.27 106.94 103.21 103.52 102.35 105.48 103.11 102.34 98.81 98.21 99.28 98.74 97.26 95.56 95.30 94.90 95.07 94.47 99.51 103.71 113.06
QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 27: BALANCE OF PAYMENTS SUMMARY (Millions of Vatu) Goods Credit Goods Debit Services Credit Current Account Income Credit Services Debit Income Debit Current trans.
cr.
Current trans dr. Current Account Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ** - Number of months cr - Credit dr - Debit 3697 3747 2765 3243 4010 851 872 760 1214 837 969 911 1030 590 638 676 861 915 785 744 799 862 992 1160 996 -6532 -4228 -5246 -5347 -5805 -2336 -1530 -1151 -1515 -1001 -1120 -1163 -944 -968 -1583 -1450 -1245 -1284 -1252 -1758 -1053 -1223 -1489 -1863 -1230 2944 4309 3393 2819 1773 668 883 780 613 517 1264 1116 1412 829 1182 605 777 691 776 844 508 357 626 527 263 -274 -234 -215 -321 -416 -42 -37 -34 -161 -40 -99 -43 -52 -42 -37 -94 -42 -49 -43 -157 -72 -83 -154 -142 -37 -3866 -4080 -3970 -3757 -4425 -1703 -1000 -695 -468 -1965 -2132 -47 64 -880 -1893 955 -2152 -1048 -184 -1487 -1038 -2336 217 -673 -1633 -17996 -24558 -25184 -23531 -23134 18959 23593 26093 26718 25421 -7704 -10939 -11463 -12285 -12278 -3586 -4338 -4821 -5251 -5126 -6087 -6512 -6833 -5881 -6188 -5402 -7713 -5058 -5267 -6723 -6483 -5375 -5182 -6201 -6376 3997 4314 4777 5871 4561 4965 6773 7294 5319 5916 7964 6894 5837 6364 7360 7157 4507 6694 7389 6831 -1619 -1859 -2102 -2124 -2320 -2900 -2806 -2913 -2741 -2836 -2604 -3282 -2798 -2891 -3256 -3340 -2777 -2856 -3075 -3570 69 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 27: BALANCE OF PAYMENTS SUMMARY …..continue (Millions of Vatu) Period Capital Account Capital account dr. Capital account
 cr.
Capital Account Capital & Financial Account Financial Account Direct Invest.

abroad Direct Invest.

in Vanuatu Portfolio invest.

assets Portfolio invest.

Other invest.

Other invest.
liabilities assets liabilities Reserve assets Financial Account -121 -126 -130 -112 -84 -30 -30 -30 -31 -31 -31 -32 -32 -32 -32 -33 -33 -35 -25 -27 -25 -25 -18 -21 -20 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ** - Number of months cr - Credit dr - Debit 157 776 -87 -72 20 20 5 5 127 263 116 37 360 -1 31 -135 18 -66 47 - -5013 13956 7629 7282 802 4682 1076 -1248 -438 -1498 -1335 -1742 3733 3697 -890 7416 1935 946 3211 1537 2090 2369 1006 1817 -9023 4119 -15631 -8565 -6341 -1383 -4599 -2859 -182 982 1405 714 1018 -5517 -4041 1697 -7770 -2885 -1554 -2346 -1780 -867 -3005 -1550 -919 -833 -958 -2114 -627 -1161 149 -209 -151 -622 56 -121 -276 -617 628 -886 -2580 724 -429 -567 166 203 -187 -185 -223 -566 1323 2136 -621 2065 4801 985 1164 -196 -388 1919 1174 -285 702 -456 -326 -889 1310 -569 -87 1607 1338 1879 225 1065 1800 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 27: BALANCE OF PAYMENTS SUMMARY …..end (Millions of Vatu) Net errors & omissions Gross Official Reserves Net Reserves (Vatu) Net Reserves (USD)
 Exchange rate (VT/USD) Memorandum Items Projected** Monthly Import Cover Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 ** - Number of months cr - Credit dr - Debit 6.8
5.0 5.0 4.9 5.6 6.1 8.2 6.8 6.0 6.8 7.8 7.3 6.8 1506 2179 2386 -572 -3360 625 -457 59 1279 1187 1282 536 -826 790 2576 -857 -123 832 -642 -298 -464 -712 -1188 -984 - QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 28: INTERNATIONAL INVESTMENT POSITION (Millions of Vatu) Period Direct Investment Portfolio Investment Assets Other Investment International Investment Position Liabilities Reserves Assets Direct Investment Portfolio Investment Other Investment Liabilities Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 ** - Number of months cr - Credit dr - Debit 57713
75850
59965 58772 68156 64462 62428 62619 73397 75850 74921 77129 72227 68981 71839 64940 62844 62164 60508 59965 59980 57880 58061 58772 Net Position -4906 -12185 -12115 -14209 -18475 -5455 -6460 -6670 -4906 -15013 -15797 -12987 -11960 -11383 -11767 -11346 -12115 -11538 -11288 -12981 -14209 -16088 -16206 -16785 -18475 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 29: VALUE OF EXPORTS Principal Exports Copra Tonnes Value Cocoa Value Tonnes Value Beef Tonnes Timber Kava Value Tonnes Value Tonnes Value Coconut Oil Tonnes Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Source: National Statistics Office 0
- - - - - - - - - 73 (Millions of Vatu) Other Domestic Products Other Re-exports Total 451
QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 30: VALUE OF IMPORTS (Millions of Vatu) Food and live animals Bev.
And tobacco Crude mtrls Mineral fuels , excl.fuels Imports for home consumption Animal, veg.

, and oil fats Chemicals Basic manufact.

Mach.

and transpt.equip.
Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Source: National Statistics Office Goods not specified 353 617 781 361 361 102 97 100 92 260 63 211 83 62 201 94 424 66 84 111 100 49 98 80 134 Total 20475 30056 27013 27392 26875 4503 5385 5730 6623 6708 7322 7858 8168 5726 5779 6527 8981 5869 6087 7866 7570 6223 6038 7239 7375 Misc.
1961 2643 3165 2736 2811 390 708 525 624 583 645 667 748 782 719 626 940 469 522 773 972 574 705 773 759 Imports for Re-exports Total Imports(c.i.f) QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 31: EXPORTS BY CONUTRY OF CINSIGNMENT (Millions of Vatu) Period EEC Japan Australia Countries New Caledonia South Korea New Zealand Other Others MSG Total 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Source: National Statistics Office QUARTERLY
577 1308 1402 1448 1403 1584 1534 1489 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 32: IMPORTS BY COUNTRY OF CONSIGNMENT (Million Vatu) Period New Zealand Australia Japan France Fiji New Caledonia Hong Kong Singapore Others Total 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 849
796 1368 943 612 938 983 1436 936 885 952 952 849 792 869 593 Source: National Statistics Office QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 31: COMPANY REGISTRATION IN VANUATU Part A: Number of Companies on the Registry at end of each Year/Quarter Type of company International Exempt Overseas Companies Total Exempt Banks Of Which Hold Licenses as: Exempt Insurance Financial Companies Companies Institutions Trust PART B: Company Registration during individual Year/Quarter 1.
Number of Fresh Registrations Overseas Exempt Companies Companies of which: Banks Local Companies Total International Companies 2.
Number of Struck off End of Period 2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Local 1,387 1,731 1,820 1,932 1,668 1,531 1590 1,622 1,661 1,731 1,792 1,783 1,820 1,866 1,876 1,904 1,932 1,829 1885* 1,489 1,668 1,676 1,683 1,781 1,818 2007 2008 2009 2010 2011 82 105 95 86 72 104 102 105 106 105 104 97 95 94 94 89 86 65 84* 53 72 61 49 49 69 26 37 38 38 35 33 33 35 35 37 38 40 38 38 38 38 38 32 37* 29 35 33 30 30 36 4,972 2,715 2,124 2,238 1,713 5,103 4,682 3,603 2,668 2,715 2,784 2,801 2,124 2,147 2,210 2,226 2,238 2,155 2207* 1,634 1,713 1,696 1,679 1,679 1,898 6,467 4,588 4,077 4,294 3,488 6,771 6,407 5,365 4,470 4,588 4,718 4,721 4,077 4,145 4,218 4,257 4,294 4,081 4212* 3,205 3,488 3,465 3,441 3,539 3,821 7 7 7 7 7 7 7 7 7 7 7 7 7 7 20 7 7 7 10* 7 7 7 7 7 7 1 1 1 1 2 1 2 1 2 1 2 2 1 1 1 1 1 2 1* 2 2 2 2 2 2 Source: Vanuatu Financial Service Commission 34* 45 29 57 84 63 47 513 151 102 84 68 147 171 146 143 151 124 108 102 76 56 97 84 63 75* 87 68 93 118 94 85 98 52 700 25 844 22 495 1,120 1,033 52 7 54 700 35 26 67 25 23 35* 131 844 na na na na 63 72 46 52 39 36 60 63 63 72 61 29 46 33 24 57 52 31 41* 16* 15 15 15 15 15 15 27 27 26 28 28 31 32 70 34 27 11 11 26 37 67 28 28 28 38* 28 28 28 28 28 2 77 QUARTERLY ECONOMIC REVIEW DECEMBER 2011
 TABLE 32: SHIPPING REGISTRATION Period Fresh Ship Registration during the Year/Quarter Ships Deregistered Number of Ships during the year/ quarter on the registry at end of the period Total of all Shipping Fees Collected by VMSL (Vatu in Millions) MPIF Trust Funds Collected by VMSL (Vatu in Millions) 2006 2007 2008 2009 2010 72.00 103.00 103.00 72.00 118.00 2006 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 24.00 21.00 8.00 19.00 27.00 24.00 32.00 20.00 24.00
Source: Vanuatu Marine Service Limited and Vanuatu Marinetime Authority 78 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 33: FINANCE CENTRE INSTITUTIONS: LOCAL EXPENDITURE, VALUE-ADDED, EMPLOYMENT AND TOTAL ASSETS (In Thousands of Vatu) INSTITUTIONS GRANT TOTAL 2006 2007 2008 2009 2010 2011 Banks 2011 Total Local Expenditure (8+12+13) (2) 3,624,375 6,350,808 6,227,421 7,356,945 7,015,872 1,821,994 1,723,154 2,038,831 2,473,711 434,880 1,145,586 1,026,600 1,349,983 1,603,002 (1) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Trust & Insurance Companies 2011 Q1 Q2 Q3 Q4 418,163 436,936 437,073 603,005 Accounting Firms 2011 Q1 Q2 Q3 Q4 Legal Firms/ offshore instns 2011 Q1 Q2 Q3 Q4 208,656 209,010 209,450
 210,684 49,589 50,608 42,325 57,020 RECURRENT EXPENDITURE Interest Rent Total (3+4+5) (4) (5) (6) 779,930
3,046,166 764,661 710,705 801,798 779,930 550,863 492,375 584,486 558,403 70,052 73,375 72,256 73,505 117,939 118,094 116,898 118,165 25,807 26,861 28,158 29,857 Total Wages & Salaries (3) 1,243,685 1,540,582 1,681,869 2,114,544 1,888,926 502,889 550,378 502,943 503,507 310,838 354,630 307,718 305,328 64,997 67,367 66,248 67,497 103,046 103,203 102,339 103,606 24,008 25,178 26,638 27,076 Other Recurrent Expenditure (7) 1,558,977 2,641,271 2,618,562 2,365,472 2,432,777 591,177 578,634 882,132 924,304 366,422 337,743 640,984 684,521 131,279 148,588 149,640 138,573 81,540 81,654 85,403 85,425 11,936 10,649 6,105 15,785 Sources: Commercial Banks, Trust Companies, Accounting Firms, Legal Firms and Offshore Institutions TOTAL (6+7) (8) (10) 5,057 18,130 14,161 42,181 9,372 17,403 1,716 1,150 2,769 17,403 1,716 1,150 2,769 0 0 0 0 0 0 0 0 0 0 0 0 TAXES AND LEVIES Import Duties Central Government Fees (9) Local Government Revenue (11) CAPITAL EXPENDITURE (13) TOTAL (9+10+11) (12) VALUE OF TOTAL ASSETS IN VANUATU (14) TOTAL LOCAL EMPLOYMENT (No.)
Ni-Van.

Expat.
TOTAL (15+16) (17) 523 669 755 763 792 795 804 831 744 516 524 553 465 128 128 128 128 113 114 112 113 38 38 38 38 (15) (16) -31,555 -31,370 19,408 8,804 -33,021 - QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 34: VISITOR ARRIVALS Period Non Resident Visitors by mode of travel Air Cruiseship Total Air arrivals by purpose of Visit Stop-over Holiday Visiting freinds Business / Meetings Other Purposes 2007 2008 2009 2010 2011 81,345 90,521 100,634 97,180 93,824 85,737 106,138 124,818 140,468 147,514 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 16,481 18,807 24,682 21,375 17,518 19,322 27,625 24,780 20,732 22,305 31,030
Source: National Statistics Office 213
QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 35: VISITOR ARRIVALS COUNTRY OF ORIGIN Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Air arrivals by Country of origin New New Zealand Caledonia Other Pacific North America Other Countries Japan Europe Australia 1,801
Total 81,343 90,520 100,675 97,177 93,824 16,481 18,807 24,683
 21,372 17,518 20,596 27,625 24,781 20,732 22,345 31,030 26,568 19,895 21,522 29,513 26,247 16,600 22,181 29,897 25,146 Source: National Statistics Office QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 36: CONSUMER PRICE INDICES (Growth relative to previous quarter) Period Food Drinks & Tobacco Rent, Clothing etc Water, Electricity Average 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 0.9 2.6 1.0 1.3 0.2 1.6 1.5 0.2 0.3 2.6 2.6 5.5 -0.2 2.5 2.6 -0.4 -1.2 3.6 1.2 -0.1 0.4 -1.0 0.7 1.6 -0.6 2.0 1.5 0.7 2.4 0.5 6.8 0.7 0.4 0.3 2.6 2.7 0.1 0.7 0.5 1.9 0.1 0.2 7.4 1.1 0.2 0.9 -1.0 0.8 2.1 -0.1 Source: Vanuatu Statistics Office 0.0 0.0 0.5 -0.5 -0.2 0.0 0.0 0.0 0.1 0.8 1.4 -1.7 -0.9 0.3 0.2 1.1 0.3 -1.9 0.0 -0.3 0.1 0.0 1.0 1.1 -2.9 1.1 0.6 -0.3 0.8 0.4 3.7 -0.6 0.4 1.1 -0.2 1.5 0.1 1.0 0.3 -0.2 5.0 -1.3 1.7 1.3 0.2 -0.2 -0.2 1.9 0.0 -0.1 82 Household Transport Recreation, Supplies & Comm.
Educ., Health etc Percent (%) ALL GROUPS -0.2 2.0 1.4 0.5 -0.5 -0.4 0.0 -0.6 0.1 0.9 0.4 1.3 1.1 1.4 -0.9 0.8 1.2 0.2 0.1 0.7 0.1 0.1 1.8 -1.3 2.8 0.8 0.5 0.1 0.0 0.3 0.4 2.0 0.6 0.1 4.4 0.2 2.5 -1.0 6.1 -1.8 0.4 0.2 1.2 -0.6 0.2 0.3 -0.4 -2.0 -6.7 4.9 1.6 -0.9 2.0 0.2 1.2 0.4 4.4 1.6 0.0 -2.8 -0.2 -40.0 -0.7 0.1 1.2 5.7 1.8 1.8 -0.9 0.0 0.0 0.1 -0.4 5.1 0.1 1.0 1.4 0.6 0.8 0.3 2.1 1.3 0.3 0.4 1.6 1.5 2.4 0.2 1.9 1.0 0.4 -1.8 2.4 0.7 0.1 0.2 -0.4 0.7 0.5 0.4 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 37: CONSUMER PRICE INDICES (Growth relative to same quarter of previous year) Period Food Drinks & Tobacco Rent, Household Transport Recreation, Clothing etc Water, Supplies Electricity & Comm.
Educ., Health etc ALL GROUPS Percent (%) End Year 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Source: Vanuatu Statistics Office 0.1 -0.2 1.9 -2.1 0.5 -0.2 -0.2 -0.1 0.1 0.9 2.3 0.6 -0.2 -0.7 -1.8 0.7 1.9 -0.4 -0.6 -2.0 -2.1 -0.2 0.8 2.2 -0.9 4.6 2.3 -1.2 3.0 1.4 4.6 3.9 4.3 4.6 0.6 2.7 2.4 2.3 2.9 1.3 1.2 -1.2 0.2 1.7 1.9 3.0 1.0 1.5 1.4 1.5 83 -1.0 8.3 0.6 2.1 -0.9 0.3 0.3 -1.0 -1.0 0.4 0.8 2.5 8.3 2.2 1.0 -0.1 0.6 -0.6 -0.3 -0.5 2.1 -0.5 2.7 -3.4 -2.3 3.1 1.9 5.6 0.1 -1.2 2.4 2.8 3.0 3.1 7.1 5.2 7.2 1.9 10.2 8.1 6.3 5.6 0.7 2.6 2.5 0.1 1.0 -1.9 -4.8 1.1 6.5 -3.6 8.2 0.9 2.1 0.6 4.9 6.6 6.5 3.0 -1.5 -2.9 -3.6 -0.7 0.7 6.3 8.2 10.1 7.8 2.0 0.9 -0.8 -0.3 4.8 4.8 4.1 5.8 2.3 3.4 0.9 3.5 4.1 4.0 4.1 3.6 3.9 6.0 5.8 6.1 5.5 4.4 2.3 2.8 1.7 1.3 3.4 0.7 0.6 1.0 1.2 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 38: CONSUMER PRICE INDICES BY REGION (Growth relative to previous quarter) Food Port Vila Luganville Drinks & Tabacco Port Vila Luganville Clothing etc Port Vila Luganville Rent, Water, Electricity Port Vila Luganville Household Supplies Luganville Port Vila Transport & Comm.
Port Vila Luganville Recreation, Educ.
and Health etc Port Vila Luganville Percent (%) ALL GROUPS Port Vila Luganville Period Group Region Average 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Source: Vanuatu Statistics Office 0.9 2.4 1.0 1.3 0.3 1.6 1.5 0.2 0.3 2.5 2.7 4.8 -0.3 2.9 2.7 -0.2 -1.3 4.5 1.4 -0.4 0.3 -0.7 0.8 2.2 -1.0 0.8 3.4 0.8 0.8 -0.3 0.1 1.5 1.7 0.1 2.9 2.2 8.5 0.0 0.9 2.4 1.4 -1.4 0.3 0.7 1.4 0.8 -2.0 0.6 -1.0 1.0 2.0 1.5 0.7 2.4 0.5 0.1 6.8 0.8 0.8 2.9 3.1 0.0 0.7 0.6 2.4 0.1 0.1 8.3 0.9 0.2 0.2 -1.3 0.8 2.5 -0.1 1.8 0.7 0.1 2.4 0.5 0.0 0.0 7.5 -0.2 1.2 0.0 1.5 0.2 0.0 0.0 0.0 0.2 4.0 1.8 0.1 3.6 0.0 0.7 0.8 0.5 0.0 0.0 0.5 -0.5 0.1 0.0 0.0 0.0 0.2 0.1 1.8 -0.8 -0.9 0.1 0.2 0.9 0.0 -2.3 0.0 -0.3 0.0 0.0 1.1 2.6 -3.5 -0.6 -0.5 1.3 -0.1 -0.8 0.0 -1.7 0.4 -1.0 3.9 0.0 -5.8 -0.2 1.4 0.0 2.0 1.6 -0.2 -0.1 -0.1 0.0 0.2 0.6 -5.4 1.4 0.8 2.0 1.4 0.5 -0.5 0.0 0.3 0.3 -0.6 0.9 0.3 1.9 1.3 7.3 -1.9 0.8 0.3 1.2 0.0 0.7 0.1 0.3 1.9 -7.5 3.1 -1.2 0.6 0.3 0.7 -0.3 0.4 0.0 -3.4 -1.7 0.7 0.9 0.8 0.0 -0.3 -0.6 0.5 1.6 2.1 0.6 0.1 0.0 -1.2 1.3 -2.1 0.8 -0.2 0.5 0.1 0.0 0.5 0.0 -0.1 2.4 -0.2 3.8 0.2 2.3 -1.1 1.4 -0.9 0.4 -0.4 0.0 -0.7 0.2 0.3 -0.5 -2.3 -0.9 5.7 1.1 2.5 0.2 0.4 -0.6 0.0 0.0 2.7 1.6 7.7 0.0 2.7 -0.4 0.6 -0.4 0.4 0.2 1.5 0.0 0.1 0.0 0.6 0.3 -4.1 0.8 1.6 -0.9 2.0 0.2 1.4 0.1 0.4 5.5 7.5 -3.2 -0.2 0.1 -0.8 0.0 1.3 6.7 1.2 2.2 -1.1 0.0 0.0 0.1 -0.2 5.9 -0.1 0.7 -0.2 0.2 0.0 0.0 0.3 0.4 1.2 0.7 -0.7 0.0 0.1 -0.2 0.4 0.2 0.2 0.0 -0.2 -0.1 0.2 0.2 0.0 -1.2 0.0 1.2 1.6 -0.9 2.0
 0.2 0.3 0.1 0.3 5.0 1.9 1.4 1.7 3.6 0.2 2.0 2.2 0.2 -2.0 2.7 0.7 0.0 0.1 -0.1 0.7 0.5 0.3 0.2 1.8 0.6 0.7 0.1 0.0 0.0 0.8 -0.2 2.4 1.0 3.7 0.2 1.0 0.4 1.3 -0.4 0.7 0.6 0.7 0.6 -1.2 0.6 0.4 0.7 1.1 0.6 -0.3 0.8 0.2 0.9 2.2 -0.5 1.8 -0.3 1.7 0.0 1.1 0.0 -0.2 -0.1 -1.5 1.7 1.5 0.2 -0.2 0.0 2.0 -0.9 -0.1 2.5 0.2 0.7 0.4 1.3 0.0 0.0 10.2 -0.2 0.1 0.0 0.1 0.6 2.7 -0.3 0.2 0.0 2.1 0.3 0.1 -0.9 -1.7 1.2 6.1 -0.3 84 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 39: COSUMER PRICE INDICES BY REGION (Growth relative to same quarter of previous year) Food Port Vila Luganville Drinks & Tobacco Port Vila Luganville Clothing etc Port Vila Luganville Rent, Water, Electricity Luganville Port Vila Household Supplies Luganville Port Vila Transport & Comm.
Port Vila Luganville Recreation, Educ.
and Health etc Port Vila Luganville Percent (%) ALL GROUPS Port Vila Luganville Period Group Region End Year 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 3.4 9.9 5.7 5.8 1.0 3.4 3.6 4.5 3.4 4.3 5.3 10.4 9.9 10.4 10.3 5.1 4.1 5.7 4.4 4.1 5.8 0.6 -0.1 2.6 1.2 5.5 14.0 3.3 3.1 -0.4 1.8 3.4 4.8 5.5 5.6 7.3 17.1 14.0 11.9 12.1 4.8 3.3 2.6 0.9 0.9 3.1 0.1 0.7 -1.6 -1.4 8.6 6.8 11.2 9.8 1.0 1.0 7.2 8.1 8.6 4.5 6.9 6.9 6.8 4.4 3.7 3.8 3.2 11.2 9.6 9.7 9.8 3.5 -0.1 2.2 1.9 7.2 2.9 0.2 9.8 4.2 0.7 -0.2 7.5 7.2 1.0 0.9 2.4 2.9 1.7 1.7 0.2 0.2 4.3 6.1 6.2 9.8 -0.3 4.3 5.1 1.9 0.2 0.2 1.2 -2.6 1.1 0.0 0.0 0.0 0.2 0.3 2.1 1.3 0.2 0.2 -1.3 0.3 1.2 -1.3 -1.5 -2.6 -2.6 0.5 0.8 3.8 0.1 -2.3 -1.2 5.0 -0.4 -1.8 0.8 -1.4 -0.9 -2.3 2.8 3.2 -2.5 -1.2 -0.1 -0.1 3.2 5.0 3.4 3.3 1.1 -0.4 -1.1 0.7 -4.6 -3.3 Source: Vanuatu Statistics Office 0.0 7.8 6.4 2.0 -0.8 0.7 1.0 1.3 0.0 0.6 0.6 2.5 7.8 11.6 9.3 7.5 6.4 0.3 2.2 2.2 2.0 1.5 3.2 -5.3 -2.5 -4.7 10.6 1.1 2.8 -0.8 0.7 0.4 -3.1 -4.7 -1.0 1.1 -0.2 10.6 2.4 1.8 -0.5 1.1 3.5 4.8 4.4 2.8 0.0 0.3 -1.9 -1.2 2.1 2.0 0.5 -0.2 -1.1 2.1 2.1 2.7 2.1 6.8 4.3 6.3 2.0 2.5 1.3 -0.2 0.5 -0.9 -0.7 -0.9 -0.2 -0.3 -2.3 -3.4 1.8 4.3 1.1 0.8 1.6 -1.1 3.0 1.6 3.9 4.3 9.4 9.4 12.4 1.1 1.9 0.6 0.2 0.8 1.7 2.1 1.8 1.6 5.5 0.9 -3.3 -2.6 7.5 -4.0 9.5 1.0 2.5 0.1 0.4 5.5 7.5 3.6 -1.5 -1.4 -4.0 -0.9 0.6 7.3 9.5 11.9 9.1 2.3 1.0 -0.7 -0.2 5.7 5.6 0.7 -0.7 0.9 0.2 -0.3 0.3 0.4 1.2 0.7 -0.8 -0.9 -0.7 -0.7 0.3 0.6 0.7 0.9 0.3 0.0 0.0 0.2 -2.2 -0.7 -1.0
 - -1.8 3.3 1.3 2.4 3.3 2.6 4.4 0.9 3.2 3.2 2.8 1.1 0.9 0.8 -1.8 -0.1 1.6 1.9 3.3 0.1 2.0 0.9 1.0 10.0 1.4 2.6 1.5 1.6 0.2 0.1 10.3 10.0 -0.6 -0.3 0.0 1.4 4.0 3.7 3.2 2.6 2.0 2.6 2.5 1.5 0.8 -1.4 4.6 5.3 85 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 40: CATTLE SLAUGHTER BY ABATTOIRS PORT VILA ABATTOIR Cattle Slaughter SANTO ABATTOIR Cattle Slaughter TOTAL BEEF PRODUCTION No.
of Heads Weight (Tonnes) Percentage Change Average Weight (Tonnes) No.

of Heads Weight (Tonnes) Percentage Average Change Weight (tonnes) No.
of Heads Weight (tonnes) Avg/Wght -5 -1 1 2 -1 -1 0 -7 -1 -1 5 -4 4 -5 1 19 -13 7 4 11 0 -24 19 22 - -10 9 -18 27 -28 -42 24 -6 33 -30 -9 77 -9 -52 51 3 18 -9 -2 46 -26 -19 -9 16 - Period 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 Source: National Statistics Office 86 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 41: ENERGY CONSUMPTION '000 Kwh / x 1000 Kwh Period Port-Vila Luganville Malekula Tanna TOTAL 2007
Port-Vila Luganville Malekula Tanna TOTAL Q1 11,314 1,549 132 66 13,062 10965 Q2 12228 Q3 12689 Q4 9255 10474 10999 1516 1556 1485 125 125 135 69 73 70 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 13045 11067 11339 12329 13635 12311 11274 12300 13820 12748 12501 13499 14075 13716 12554 13669 1649 1562 1615 1655 1585 1612 1629 1703 1773 1834 1837 2061 1751 1985
Imports Cleared for Home consumption ('000 litres) Kerosene Fuel Petrol - 98 110 87 33 20 16 - 879 501 - - Source: Unelco Vanuatu Limited and Department of Customes/ Unelco Vanuatu Limited et Sercies des Douanes (1) Includes White Spirit / Y compris le White Spirit 87 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 42: POSTAL SERVICES Period Letters Priority Letters Printed Matters Packets Parcels Registered EMS Total Domestic Mail International Mail Inbound Outbound Total 242,007
460,967 271,678 1,400,921 473,277 242,007 1,401,623 428,000 231,030 1,328,030 399,484 196,674 1,256,836 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 9,487
Source: National Statistics Office Source: National Statistics Office QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 43: MOTOR VEHICLE REGISTRATION – PORT VILA AND LUGANVILLE Period
 Motorcars Pickups Trucks Buses Motor-cycle 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Source: Vanuatu Statistics Office 64
Total 1008 1409 1118 1157 1172 215 238 276 279 266 352 460 331 307 295 257 259 277 290 291 304 280 340 286 256 QUARTERLY ECONOMIC REVIEW DECEMBER 2011 TABLE 44: NUMBER OF PROVIDENT FUND CONTRIBUTION MEMBERS/FULL EMPLOYMENT Period Males 2007 2008 2009 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 % 62 62 60 60 62 62 61 62 61 61 61 62 60 60 60 60 60 60 60 60 60 59 59 60 Females 25,191 26,978 25,580 26,771 26,732 6,358 6,205 5,839 6,789 5,525 6,930 6,178 8,345 6,066 6,148 6,646 6,720 6,546 6,692 6,608 6,925 6,957 6,730 6,047 6,998 % 38 38 40 40 38 38 39 38 39 39 39 38 40 40 40 40 40 40 40 40 41 41 41 40 Total 65,949 70,194 63,823 66,647 65,786 16,814 16,271 15,063 17,801 14,203 17,976 15,851 22,164 15,314 15,366 16,501 16,642 16,447 16,548 16,462 17,190 17,196 16,454 14,776 17,360 Source: Vanuatu National Provident Fund 90