Jun 2010 Financial News

External trade balance improved by 20% in January

Jun 09, 2010

JAMAICA’S trade balance improved 20 per cent in January to US$307.9 million ($27 billion) compared with January 2009 despite export reductions which alumina and coffee stakeholders said were expected.

The improvement isn’t a reflection of growth rather imports are reducing faster than exports, according to a recent Bank of Jamaica (BOJ) report which compiled Statistical Institute of Jamaica data. Jamaica’s trade balance comprised the difference between US$10.7 million in exports and US$41.5 million in imports in January.

The largest loss in export earnings resulted from the continued fallout from alumina sector which declined by 34.3 per cent to US$29.5 million in January 2010 alone according to most recent BOJ data. Over 10 months ending January 2010, alumina exports declined 71 per cent or US$278 million compared with the similar period 12 months prior. The percentage decline in January although half that over 10 months was not indicative of fundamental improvement for Philip Baker, director of economics at the Jamaica Bauxite Institute. The reason is that Jamalco still remains the only operational plant in an industry affected by the economic downturn.

“In terms of production, we have not had anything of an improvement over last year,” Baker told the Business Observer, Monday. “Saying that there has been an improvement is far fetched.”

The closure of three plants — Alpart’s St Elizabeth-based refinery and Windalco’s Ewarton and Kirkvine plants — cost the country some 250,000 tonnes of alumina production a month; whilst Jamalco produces some 116,000 tonnes a month, he said. Baker added that for the 2009 calendar year 1.875 million metric tonnes of alumina were exported versus 4.03 million metric tonnes in 2008, a decline of 53 per cent.

Incidentally, coffee had the largest percentage decline amongst traditional and non-tradition exports during January. The luxury crop declined 52 per cent and earned US$1.3 million during January versus US$2.8 million in January 2009. Its the second consecutive month of decline for coffee affected by reduced crop and fall in the ceiling price at which coffee is sold in markets such as Japan.

“The decline is consistent with our projections,” Coffee Industry Board head Christopher Gentles told the Business Observer. “The crop production was down by 40 per cent there is a reduced price.”

However, Coffee is still performing well when its export earnings over ten months ending January 2010 is compared with the same period 12 months prior earning US$26.85 million versus US$22.5 million from April 2008 to January 2009.

The balance of payments (BOP) is a summary of economic activities between the residents of a country and the rest of the world during a given period, usually one year.

Jamaica’s trade balance has been showing improvement since 2009 when oil prices fell relative to 2008 record highs. But also exports declined due to global recession.

The main reason for the import decline in January was that food, chemical and machinery imports declined by 45 per cent, 43.5 per cent and 48 per cent respectively. These reductions along with other categories of general merchandise imports saved the country US$94.5 million. Mineral fuel actually increased 20 per cent in January to US$155.8 million even though from April to January fuel declined by the largest margin amongst other groups by 52 per cent saving the country US$1.38 billion. From April 2009 to January 2010, the trade deficit was US$3.1 billion a 34 per cent improvement over the prior 12 months.


Source:
STEVEN JACKSON Business writer
jacksons@jamaicaobserver.com
Jamaica Observer
Wednesday, June 09, 2010

http://www.jamaicaobserver.com/business/External-trade-balance-improved-by-20-in-Jan