Hurricane Spending Pushes Fiscal Target to 4.4 Per Cent

Government spending on hurricane reconstruction projects during the last quarter of 2004 has forced an adjustment of the fiscal target for 2004/05 to about 4.4 per cent, which is just outside the initial 3 to 4 per cent target.
Finance and Planning Minister, Dr. Omar Davies, made the announcement as he addressed Mayberry Investment’s monthly investment forum held on January 19 at the Knutsford Court Hotel in New Kingston.
“Our target had been a fiscal deficit between 3 and 4 per cent [however] our conservative estimate is that we can make 4.4 per cent, which is slightly outside of the initial target, ” he stated.
The shift in the deficit target, Dr. Davies explained, was due to the financial resources the government had to allocate to various reconstruction projects due to Hurricane Ivan. The Minister said the unexpected natural disaster last September, disrupted what would have been a year of economic growth for the country.
Prior to the hurricane, he said, the economy had recorded growth of 2.6 per cent in the first quarter of the year, and 2 per cent in the second quarter.
“Needless to say, the third and fourth quarters were badly affected by Hurricanes Charley and Ivan, hence the adjustment in our targeted growth is understandable as agriculture was sort of wiped out for the period, and it also impacted on the bauxite and alumina industry,” Minister Davies stated.
He stressed that the reduced revenues and the demands for additional expenditure for reconstruction efforts, “would create a difficulty to make the [initial] 3 per cent to 4 per cent target.”
He assured however, that the government intended to “balance the budget for the 2005/06 fiscal year,” and strive to achieve single-digit inflation.
Turning to the economic outlook for 2005/06, Dr. Davies said that Jamaica should benefit from significant inflows of foreign direct investment (FDI) during the period.
The inflows, he said, should come from the continuation of several development projects during the period, such as the expansion of the Montego Bay International Airport and highway construction projects and expansion of the Jamalco bauxite plant.”There are going to be significant foreign direct investments coming in and so we are comfortable in terms of our reserves,” he said.
Dr. Davies was speaking on the topic: ‘What’s Ahead for Jamaica’s Economy in 2005’.