BOJ Expects Modest Growth for March Quarter

The Bank of Jamaica (BOJ) is expecting some recovery in the domestic economy for the January to March quarter, with marginal growth projected in the range of zero to one per cent.

Governor of the Bank of Jamaica (BOJ), Brian Wynter, gave the forecast as he addressed the BOJ’s quarterly press briefing held on Monday, February 25, at the Bank’s Auditorium, Nethersole Place, downtown Kingston.

He stated that given the outlook for the quarter, real Gross Domestic Product (GDP) for the financial year 2012/13 is projected in the range of negative 0.5 per cent to positive 0.5 per cent.

“The forecast is predicated on continued recovery in the global economy as well as favourable weather conditions,” Mr. Wynter said.

He also said domestic inflation is projected to fall within the range of two to three per cent for the March 2013 quarter, with the main inflationary impulses to emanate from imported prices, mainly oil, as well as annual upward adjustments in the domestic economy to service fees and contracts such as rent.

The Bank’s forecast for inflation for 2012/2013 remains in the range of 7.5 to 9.5 per cent.

Meanwhile, real GDP is estimated to have contracted in the range of zero to one per cent for the October to December quarter. The BoJ Governor said that the impact of the passage of Hurricane Sandy in Jamaica and the United States and reduction in economic activity contributed to the decline.

The Bank estimates that there were contractions for all major industries, with the exception of Construction, and Finance and Insurance Services. Preliminary data for the agricultural sector indicate that domestic crop production contracted by 14.9 per cent relative to an average quarterly expansion of 6.7 per cent for the preceding three quarters.

Inflation for the quarter remained favourable due to lower than expected international commodity prices and persistently weak domestic demand, as well as the containment of inflation expectations.

Headline inflation was 2.6 per cent for the review quarter, in line with the average for the previous five December quarters, but below the Bank’s forecast range of 0.3 per cent to 4.0 per cent.

“The deviation from forecast mainly reflected lower than anticipated international commodity prices as well as a lower than expected impact on domestic agricultural prices from the passage of Hurricane Sandy. In particular, there was an unexpected fall in fuel prices in the quarter and a slower than anticipated pass-through of the exchange rate depreciation,” Mr. Wynter said.

There was also an increased pace of depreciation in the exchange rate for the December quarter, primarily reflecting excess demand for foreign currency.

Meanwhile, there was a decline of US$131.7 million in the Net International Reserves (NIR), to US$1.12 billion at the end of 2012. At the end of the year, the Bank’s gross reserves amounted to US$1.9 billion, representing 13.2 weeks of projected goods and services imports.