Economy Grew 1.8 Per Cent Last Quarter

The economy grew by 1.8 per cent and showed steady, positive improvements during the April to June quarter with solid performances in the goods-producing sectors of agriculture, construction and manufacturing.
Director General of the Planning Institute of Jamaica (PIOJ), Dr. Wesley Hughes, addressing the quarterly media briefing held on (Aug. 15) at the Institute’s Grenada Way offices, noted that agriculture grew by 3.0 per cent, with domestic and export crop production increasing by 2.2 per cent and 26.2 per cent, respectively.
Construction and installation went up 3.6 per cent, showing steady improvement following the cement fall-out of 2006. There was also an increase in non-residential construction, with the Ministry of Housing, Transport, Water and Works’ expenditure for flood damage rehabilitation, river training, road repairs and maintenance, going up by $1.2 billion. The National Works Agency (NWA) also had significant expenditure during the period, particularly on the North Coast Highway (segment II), with spending of more than $328 million.
In terms of manufacturing, Dr. Hughes indicated that the sector made a good “come-back”, increasing by 1.2 per cent over the previous quarter and was the first time in about six quarters that the sector had recorded growth.
Of note, he said, was the growth of 1.4 per cent in the food and beverage sub-sector, which had seen significant decline in some areas in the previous quarter. Other manufacturing also grew, with cement recording a 4. 5 per cent growth and petroleum products, six per cent.
Turning to services, Dr. Hughes said that the sector saw positive growth of 1.7 per cent, however the growth was not reflected in tourism, which showed a 3.5 per cent decline. Dr. Hughes explained that the downturn is somewhat regional, although there are some countries that have shown some growth. “There has been debate as to the reason for this. Some have attributed the passport regulation in the United States as a factor. We have played this down somewhat because we have seen where the decline has affected US territories that do not require passports,” he said.
According to Dr. Hughes, “if you were to look at a more normal growth period like 2005 and compare 2007 with that, we are still some 17 per cent above 2005. While there has been a decline, it should not be seen as any dramatic deterioration in Jamaica’s position. It’s just that last year was a very abnormal year where we jumped by 19 per cent because of a particular situation in Cancun, (Mexico). We are going back to normal growth rate this year”.
He pointed out that in 2006, there was “spectacular growth” in the sector when Cancun was out of the market and “with the return of Cancun and the normalization of flows in the region, we do not expect that kind of growth.”
In the meantime, inflation for the quarter was 1.9 percent, while the fiscal deficit was about $9 billion, which is $ 4.7 billion less than programmed, and $0.6 billion higher than recorded in the similar period of 2006.
In addition, Dr. Hughes said, “we saw revenues being $200 million less than programmed, which was fairly good in terms of the projections and the actual collection”. Expenditure was about $4. 9 billion or 7.1 per cent lower than programmed, while revenues and grants totaled $55.7 billion. Export figures were also up by nine per cent to just over $700 million.
Turning to the foreign exchange market, the PIOJ head said that the nominal average exchange rate was J$68.4 per US$1, representing a 1.1 per cent nominal depreciation compared to the quarter ending March 2007. This translates into real exchange rate depreciation of 0.7 per cent during the quarter. There was some depreciation in the real exchange rate of about 2.6 per cent.
Looking to the July to September quarter, Dr. Hughes said GDP growth of 2.1 per cent is being projected. Speaking to prospects for the short term, he said, “we expect the overall economy to remain positive and growing. We expect the macroeconomic environment to remain relatively stable”.