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Minister of Finance and the Public Service, Audley Shaw, has said that the macroeconomic programme for the 2008/09 fiscal year is aimed at creating the conditions that can support sustainable growth into the medium term.
The Minister, who was speaking yesterday (April 10) during the opening of the 2008/09 Budget Debate in the House of Representatives, explained that the main features of the programme include the restoration of growth in agriculture; the implementation of additional capacity in the manufacturing and export sectors; improvement in fiscal performance and debt indicators; monetary conservatism to minimize inflation risks; and the maintenance of adequate reserves to support investor confidence.
“The programme is couched within the context of the challenging international financial conditions. The range of outcomes associated with the domestic policy path takes account of the extent to which changes in these external conditions could alter expectations and outcomes,” Mr. Shaw said.
He noted that the risks to the macroeconomic programme projections largely emanate from the possibility of sharper than anticipated increases in international commodity prices (including oil prices), adverse weather conditions, and a recession in the United States.
“Simulations show that Jamaica’s Gross Domestic Product (GDP) growth would not be significantly affected and the external accounts would improve marginally in a scenario where a recession in the United States (US) lasts for two quarters only,” Mr. Shaw told the House.
He noted that the correlation between Jamaica’s economic performance and the US business cycle has not been strong and the sources of the main financial flows, tourism and remittances, have become less sensitive to these business cycles. “Inflation could be lower by approximately 1.5 percentage points, relative to the baseline, depending on the impact of the lower global demand on commodity prices,” he added.