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Finance and the Public Service Minister, Hon. Audley Shaw, said that after registering a decline during this fiscal year, real Gross Domestic Product (GDP) is expected to rise by 0.5 per cent in the next financial year.
“The growth outlook reflects both gradual pick up on activity in the mining sector, as global demands recover, and continued investment and growth in Jamaica’s highly competitive tourism sector,” Minister Shaw said on Tuesday (Jan.19), as he outlined the medium-term macroeconomic framework to the House of Representatives.
He said the economic recovery programme aims to achieve sustained growth with a two per cent increase in real growth by financial year 2011/2012.
The Minister pointed out that restoring fiscal and debt sustainability will reduce sovereign risk premiums and boost private sector investment, which will benefit agriculture and other activities that are linked to the tourism sector.
Also, under the economic programme, inflation is expected to trend down to the six to seven percent range over the medium-term. Mr. Shaw told the House that despite a temporary increase in inflation this fiscal year, which resulted from the introduction of new tax measures, underlying price pressures will remain limited, given the absence of strong foreign exchange market pressures.
“In subsequent years, monetary policy will continue to focus on quickly bringing inflation to six per cent,” he stated.
The Finance Minister pointed out that the fiscal policy is aimed at eliminating the overall public sector deficit over the medium-term and putting the debt to GDP ratio on a downward path.
“This improvement is consistent with a significant reduction in the interest bill and an increase from six per cent of GDP to nine per cent in the primary surplus of the central Government. The debt to GDP ratio will decline steadily from 140 per cent of GDP in financial year 2009/2010 to below 120 per cent of GDP over the next four years,” he explained.
In this context, Mr. Shaw asserted, the balance of payments is expected to make a marked improvement over the medium-term. “Higher national savings as a result of fiscal adjustment, the gradual recovery in world demand and a recovery in remittances, are projected to help narrow the current account deficit from about 10.5 per cent of GDP in financial year 2009/2010 to about nine per cent in financial year 2010/2011, and further to around five per cent of GDP over the medium-term,” he told the House.
This improvement, coupled with projected recovery in foreign direct investment, should result in solid overall balance of payments surpluses, starting in the 2011/2012 financial year. Mr. Shaw said.
Meanwhile, he said, gross international reserves are projected to remain at some three to 3.5 months of imports of goods and services during the programme period and remain at approximately 3.5 months over the medium-term.

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