BOJ Projects Modest Growth for 2013/14

The Bank of Jamaica (BoJ) is projecting economic growth ranging between 0.5 and 1.5 per cent for the 2013/14 fiscal year.

BoJ Governor, Brian Wynter, who made the disclosure during the Bank’s quarterly media briefing on Wednesday, May 15, said this forecast is based on the “expected boost” to investor confidence, consequent on the government’s recent conclusion of a four-year Extended Fund Facility (EFF) with the International Monetary Fund (IMF), and the resulting funding support from other multilateral agencies and institutions anticipated.

The IMF has already disbursed an initial US$207.2 million under the EFF provision to Jamaica, of which US$87.9 million represents budgetary support for the government.

This, the Governor said, is expected to be complemented by anticipated loan and grant funding of some US$2 billion in multilateral support from agencies such as the World Bank, European Union (EU), and Inter-American Development Bank (IDB), over the medium term.

Mr. Wynter pointed out that the private sector is expected to benefit from the government’s fiscal consolidation programme, which is anticipated to release resources for investments.

“The robust growth of 18.4 per cent in private sector credit for 2012/13 is anticipated to provide some momentum for the projected growth for the current (2013/14) fiscal year. Note (should) be taken of the decline of 50 basis points, or half per cent, in average lending rates to the private sector at commercial banks during the March quarter,” he informed.

While noting that these rates are “still higher than desired”, Mr. Wynter said this “bodes well” for future credit expansion.

“In this regard, at 5.3 per cent, the quarter saw the strongest rate of quarterly growth in loans and advances since 2011,” he added.

Mr. Wynter said BoJ estimates for the January to March quarter suggest that the economy contracted in the range of -1.2 to -0.2 per cent. The economy is estimated to have contracted in the range of -1.0 to 0.0 per cent for the 2012/13 fiscal year.

“The estimated outturn for this (January to March) quarter reflected the impact of drought conditions as well as weak domestic and external demand. In addition, continued uncertainty about prospects for the economy had a debilitating impact on investments and economic activity in general,” the Governor stated.

In light of this, Mr. Wynter contended that the IMF’s approval of the Extended Fund Facility for Jamaica and anticipated strengthening of currency inflows from multilateral agencies should serve to boost confidence in the economy.

Additionally, he said interest rates continue to be at “historically” low levels, and are expected to remain relatively low in light of the successful implementation of the National Debt Exchange (NDX), and the government’s fiscal consolidation programme.

“These developments are expected to lead to a gradual recovery in the domestic economic activity and per capita income over the near to medium term. In this context, the Bank of Jamaica’s primary focus will remain the reduction of inflation over the medium term, towards levels which prevail among our trading partners,” Mr. Wynter said.

Contact: Douglas McIntosh