Aug 2010 Financial News

Economy shrinks in June quarter — PIOJ. Mining, quarrying register only growth

Aug 26, 2010

THE Planning Institute of Jamaica (PIOJ) estimates that real GDP for the domestic economy during the June quarter contracted by 0.8 per cent relative to the corresponding period last year, with the goods-producing and services industry declining by 1.6 per cent and 0.9 per cent respectively.

According to the PIOJ, aside from mining and quarrying, which grew by 4.3 per cent, all categories within the goods-producing industry declined over the quarter. Agriculture was hardest hit with a 3.5 per cent decline, catalysed by a sharp fallout in traditional export crops. The manufacturer and construction sectors fell by 1.6 per cent and 1.5 per cent respectively.

All categories within the services industry declined, with the greatest decline posted by the finance and insurance services sector, down by two per cent against the background of the Jamaica Debt Exchange which resulted in a reduction in interest income for many financial institutions, foreign exchange losses due to the appreciation of the Jamaican dollar and a reduction in the stock of commercial bank loans and advances.

The hotels and restaurants sector was down by 1.6 per cent, attributed to a 5.4 per cent falloff in total arrivals and a 13.4 per cent decline in cruise visitor arrivals.

Electricity and water supplies posted a 1.5 per cent decline.

"The declines recorded during the quarter reflects the impact of the lagged effects of the global recession on the local economy, the lingering effects of the drought conditions on agriculture output and police operations on the business activities in sections of Kingston and St Catherine and as far away as farm communities in St Elizabeth, St Thomas and Portland, as well as international travel," newly appointed PIOJ director-general Dr Gladstone Hutchinson said at a press briefing held at the PIOJ headquarters in St Andrew.

Mining and quarrying, the single growth area over the period under review, posted its first increases since the last quarter of 2008. Total bauxite production grew by 35.1 per cent, with crude bauxite production up by 103.1 per cent and offsetting a 10.4 per cent drop in alumina production against the background of closure of three of the four local alumina plants. According to the PIOJ, the growth in crude bauxite production was due to an increase in the capacity utilisation rate to 98.9 per cent compared with 48.3 per cent for the corresponding period last year.

The short-term prospects for the economy are positive, as the PIOJ projects that real GDP will grow between 0.0 and one per cent over the September quarter, mainly due to increased growth in mining and quarrying, renewed growth in agriculture and tourism, growth in remittances and exports, and a turn-around in other industries that were impacted by the recession.

"We are expecting the global recovery to have a positive impact on the outturn of the Jamaican economy for the rest of the year ...In addition, the International Monetary Fund agreement and the suppport of the multilaterals have signalled a support for the Jamaican economy particularly within the context of the reform agenda being pursued," said Hutchinson.


Source:
BY JULIAN RICHARDSON
richardsonj@jamaicaobserver.com
Assistant business coordinator
Jamaica Observer
Thursday August 26, 2010

http://www.jamaicaobserver.com/business/Economy-shrinks-in-June-quarter---PIOJ_7904392