Growth of 1 to 2 Per Cent for June Quarter

KINGSTON — The domestic economy is estimated to register real growth in the range of one to two per cent for the June 2011 quarter, Governor of the Bank of Jamaica, Brian Wynter, announced yesterday.

He also noted that the Net International Reserve (NIR) was just under US$2.3 billion at the end of June, there was continued stability in the foreign exchange market and the inflation rate continued to moderate at 2.0 per cent, showing that the economy is on the mend.

Mr. Wynter presented the Bank's Monetary Policy Report for the April to June quarter, at a media briefing at the Bank's Nethersole Place headquarters in Kingston on August 25.

The Report, which reviewed the performance of monetary policies being implemented, also reflected some of the Bank’s perspectives on the possible impact on the Jamaican economy if there is a sharp deceleration in world growth and, in particular, growth in the USA, consequent on the events leading to the recent rating downgrade of US treasury bonds and the on-going debt crisis in Europe.

The Governor said in the context of continued growth in the external economy and marginal improvements in domestic demand conditions, the real sector is estimated to have recorded real growth in the range 1.0 per cent to 2.0 per cent for the June 2011 quarter.

“This follows growth of 1.4 per cent in the March 2011 quarter. The performance in the review quarter reflected moderately strong growth in the tradable industries as well as marginal expansion in the non-tradable industries," he said.

He explained that within the tradable industries, robust growth was estimated for mining and quarrying and modest expansion for hotels and restaurants.  Estimated growth in agriculture, forestry and fishing and wholesale and retail trade, repairs and installation largely influenced the performance of the non-tradable industries.

Price stability, one of the core functions of the central bank, continued to show positive results. "Headline inflation was 2.0 per cent for the June 2011 quarter, at the lower end of the Bank's forecast range of 2.0 per cent to 3.0 per cent. This out-turn also compared favourably with the five-year average of 3.1 per cent for June quarters. Consequent on the out-turn for the review quarter, 12-month inflation continued to decline to 7.2 per cent at end-June 2011, relative to 13.2 per cent at end-June 2010,” Mr. Wynter reported.

He also noted that all the Bank’s 12-month measures of underlying inflation declined significantly, relative to the estimates at end-June 2010.  “The inflation out-turn in the review quarter largely reflected the effect of the increases in crude oil prices on the cost of energy as well as the lagged impact of higher grain prices in the previous quarter on domestic processed food prices,” he added. 

The Central Bank Governor said there were increases in the prices of some domestic crops, as supplies moderated towards the end of the quarter, while continued stability in the foreign exchange market and weak but improving demand continued to have a moderating impact on inflation.

With respect to the foreign exchange market, Mr. Wynter said the continued stability in the foreign exchange market was reflected in a marginal depreciation of 0.19 per cent in the June quarter. This followed an appreciation of 0.13 per cent in the March 2011 quarter. 

“This stability was largely influenced by continued strong net private capital inflows, which partly reflected repayments at maturity by the Government of Jamaica of a Eurobond in May 2011. Repayment of the bond was facilitated by a drawdown from net international reserves (NIR) of the funds that were raised for this purpose by the government in February 2011. As a result, the NIR was US$2,267.1 million at end-June, relative to US$2,553.1 million at end-March 2011,” he explained.

The estimates of the Bank of Jamaica indicate that there was continued moderation in world growth in the June 2011 quarter, relative to the previous quarter. These estimates, Mr. Wynter said, reflect slower growth in the advanced economies as emerging market economies, such as China and India, continued to expand at a vigorous pace. 

The Governor observed that growth in output in the advanced economies continued to be adversely affected by the disruption in supply chains, following the crisis in Japan and the on-going political tensions in the Middle East and North Africa.  In addition, there were upward pressures on the prices of international commodities in the review quarter, in spite of some abatement towards the end of the period.

By Allan Brooks, JIS Senior Reporter