May 2015 Financial News

Jamaican economy floats into positive waters. 0.3% growth for the quarter

May 22, 2015

JAMAICA'S economy just edged into positive territory with a weak growth rate of 0.3 per cent in the 2015 first quarter -- following consecutive quarter declines last year, but the country could see another contraction over the April to June period, according to the Planning Institute of Jamaica (PIOJ).

The country's growth was less than the marginal rate of between 0.5 and 1.5 per cent previously anticipated by the PIOJ, which had based the prospects on the continued strengthening of productive activities, particularly in the goods-producing industries. However, while the first-quarter growth saw a slight increase of 0.6 per cent in the services industry, that was offset by the goods-producing industry shrinking by a projected rate of 0.7 per cent.

"The positive out-turn for the January to March 2015 period largely reflected the impact of the improved global economic environment, particularly on some of the major service industries, including hotels and restaurants; transport, storage and communication," director general of the PIOJ Colin Bullock stated during the PIOJ quarterly press briefing on Wednesday.

Real value added for the hotel and restaurants industry increased by 4.0 per cent, reflecting increases in stopover arrivals of 5.0 per cent and cruise passenger arrivals of 15.9 per cent, while transport, storage and communications registered growth of 1.0 per cent from increases in air transport and volume of cargo handled. The telecommunications segment was estimated to have grown due to increased competition among the main providers.

Bullock added that the growth was reflected from an improvement in domestic demand resulting from the strengthening of both business and consumer confidence levels; as well as the intensification of road rehabilitation and repair works, new road construction and other building construction, including, Phase 1 and Phase 3 of the North-South link of Highway 2000.

Hotel construction and expansion, and construction of new office space to facilitate the expansion of Business Process Outsourcing (BPO) activities also favourably impacted on the economy.

Another positive area was the construction industry, which grew by 1.4 per cent, reflecting higher capital expenditure from the National Works Agency, up 28.2 per cent to $639.5 million. The National Road Operating and Construction Company also made disbursements of $5.6 billion compared to $788.5 million year over year, due in part to work on the Highway, according to the PIOJ, while telecommunications disbursed $10.5 billion compared with $2.5 billion in the comparable quarter last year.

Fall in agriculture

Among the goods-producing industry, the agriculture, forestry and fishing industry fell by 0.5 per cent, largely reflecting reflecting a decline in traditional export crops of 11.6 per cent. The PIOJ said the performance largely reflected the late start of the 2014/15 sugar cane crop season which was mitigated by the significant upgrading of two main factories.

The upgrading resulted in a decline of 21.2 per cent in total sugar cane production, while lower output was also recorded for banana, down 3.8 per cent, and cocoa, down 60.9 per cent, reflecting the lingering impact of drought conditions.

Coffee production, however, increased by 12.6 per cent, but is anticipated to decline in the next quarter following the destruction by fire of some the island's Blue Mountain Coffee farms.

During the quarter, real value added for mining and quarrying increased by 0.2 per cent reflecting increased global demand, while total bauxite production saw increases in alumina production by 0.2 per cent to 476.8 kilo tonnes and crude bauxite production up 8.2 per cent to 1255.0 kilo tonnes. The improvement was due to increases in average capacity utilisation rate at alumina refineries by 43.5 per cent and 5.5 percentage point increase in the bauxite capacity utilisation rate to 95.1 per cent year over year, respectively.

Real value added for the manufacturing industry fell by an estimated 3.1 per cent, evidenced by declines of food, beverages and tobacco, and declines in four of the six petroleum products subcategories, the PIOJ stated.

Finance and Insurance were estimated to have grown by 0.3 per cent during the quarter, reflecting an increase in net interest income and the value of total assets at deposit taking institutions, while electricity and water recorded a decline of 2.8 per cent.

"Electricity recorded a decline of 2.0 per cent reflecting lower levels of consumption by all categories, with the average number of customers declining by 21,925 to 584,766 relative to January to March 2014," Bullock stated.

Water production fell by 0.9 per cent reflecting the net effect of a 13 per cent decline in the production in the western division, and 7.0 per cent increase in the production in the eastern division, due largely to a 288 per cent increase in water production in Portland, according to the PIOJ.

Source:
BY KARENA BENNETT
bennettk@jamaicaobserver.com
Business reporter
Jamaica Observer
Friday May 22, 2015

http://www.jamaicaobserver.com/business/Jamaican-economy-floats-into-positive-waters_18987772