May 2008 Financial News

Jamaican economy stalls in the first quarter of 2008

May 16, 2008

Unplanned events created a general slowdown of the economy during the first quarter fo the year. Speaking at the Planning Institute of Jamaica's (PIOJ) quarterly media briefing, Director general of the PIOJ, Dr Wesley Hughes, stated that the economy during the review period was impacted by global challenges in terms of the increased commodity prices in particular crude oil, wheat, rice and fertiliser, as well as unexpected heavy rains in February.

Looking forward, Hughes stated that for the upcoming quarter April to June 2008 the outlook is marginally positive, with gross domestic product (GDP) expected to grow between 0.5 per cent to 1.1 per cent. Continued growth in the Construction & Installation Industry should impact favourably on the Goods Producing sector, which is projected to show a minor increase of nil to 0.8 per cent. Growth in Hotels, Restaurants & Clubs and the Distributive Trade should result in further improvements within the Services sector between 0.9 per cent to 1.3 per cent.

The Quarter under Review
Economic performance for the first quarter of the year-January to March remained relatively flat, when compared to the corresponding period last year, with real GDP recording an estimated 0.2 per cent growth. Construction & installation, miscellaneous services, Finance & insurance services, distributive trade as well as real estate & business services were the star performers over the period. However, the continued downturn in agriculture and mining sectors contributed to an overall decline of 2.4% in the goods producing sector. impacted on the general slowdown of the economy. The announcement was made this morning at the Planning Institute of Jamaica (PIOJ), during the quarterly press briefing.

The performance of the Goods producing sector was less than expected he said, showing declines in all goods producing sectors with the exception of the Construction & Installation Industry which rose by 3.5 per cent. Dr. Hughes explained that the residual effects of Hurricane Dean which hit the island in August 2007 coupled with the heavy rainfall in February 2008, severely hampered growth within the agriculture sector which registered a decline of 14.1 per cent. Unexpected fires in the parish of St Elizabeth impacted domestic crop production, down 19.7 per cent, while export crop production fell by 30.5 per cent.

Mining & quarrying declined by 3.5 per cent with total bauxite production decreasing by 1.7 per cent. This resulted from a 2.7 per cent fall-off in crude bauxite production stemming from maintenance of a conveyor belt. Alumina production also fell by 4.2 per cent, due to equipment problems at a number of refineries.

Poor performance in the Manufacturing sector (down 0.9 per cent), said Hughes, was due primarily to decreases in the production of food, beverages & tobacco (down 1.8%). Although, Other manufacturing showed some improvement, registering an increase of 0.3 per cent. This was reflected by increased output from metal, fabricated metal products, machinery & equipment and the chemicals & Chemical Products sub-sectors.

Commenting on the steady improvement in the Construction & Installation Industry, Hughes stated that this was attributable to increased activities in non-residential construction, driven largely by major road improvement, hotel construction and expansion work at the island's two international airports as well as at the Kingston Container Terminal.

The services sector continued to demonstrate positive growth of 1.7 per cent with the main growth areas being the Distributive trade, finance & Insurance services, Real Estate & Business services and miscellaneous services (hotels, Restaurants & clubs). Increased Loans and Advances to the Distributive Trade sector, as well as increased remittance flows of 11.9 per cent and an expansion in imports, contributed to the 1.2 per cent growth within the sector. The finance & insurance sector, which grew by an estimated 2.0 per cent, was favourably impacted by growth in all components of the sector. Hotels, restaurants & clubs continued to show marked improvement with growth of 9.1 per cent. Total tourist arrivals up 6.7 per cent, reflected a 12.1 per cent growth in stopover arrivals while cruise ship passengers grew by 1.1 per cent. Transport, storage & communications and electricity & water experienced declines of 0.4 per cent and 1.2 per cent, respectively.

In reviewing the performance of the macroeconomy for the quarter, the director general stated that this should be seen within the context of a quarterly inflation rate of 5.2 per cent and a fiscal surplus of $2.4 billion, which was $6.9 billion less than programmed and $0.7 billion more than recorded in the corresponding period last year.


Source:
The Jamaica Observer
Dennise Williams
Friday, May 16, 2008

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