KINGSTON — The Jamaican economy, fuelled by strong performances in mining and quarrying, hotels and restaurants, agriculture, forestry and fishing, recorded growth of 1.5 percent during the April to June quarter, the second consecutive period of growth of more than one percent.
However, while the Planning Institute of Jamaica (PIOJ) is pleased with the out-turn for the quarter, the institute is cautiously optimistic that the growth trajectory of the past two quarters will continue, because of challenges from the downgrading in the US economy and fiscal adjustments expected to the 2011/12 budget.
The assessment was delivered by the PIOJ at its quarterly review of the country’s economic performance, at a media briefing at its New Kingston Offices today. Director General, Dr. Gladstone Hutchinson, noted that the growth in real Gross Domestic Product (GDP) reflected the positive out-turn of the goods producing industry, which posted an increase of 5.3 per cent, and the services sector which increased by 0.2 percent.
“This represented the first quarterly growth for the Services Industry since October – December 2007,” he noted.
Within the goods producing industry, all categories recorded increases, with mining and quarrying registering the largest growth, of up by 30.8 percent. Agriculture, manufacturing and construction grew by 9.0 percent.
Nearly all sub-categories of the services industry recorded growth, with hotels and restaurants registering the largest increase of 2.5 per cent, followed by finance and insurance with 0.5 percent and the wholesale and retail trade, which grew by 0.5 percent.
Other macro-macroeconomic highlights of the economic performance included the continued moderation of the rate of inflation. For the review period, the rate of inflation was 2.0 percent. The main contributors to the upward price movements were housing, water, electricity, petrol and other fuels, food and non-alcohol beverages. Remittances recorded an increase of 6.7 percent, amounting to some US$507.6 million.
Dr. Hutchinson attributed the overall improvement recorded in the economy during the quarter to the positive performance in all industries, except electricity and water supply, as well as transport, storage and communication industries and increased production and replanting activities in agriculture, following the impact of Tropical Storm Nicole and more favourable weather conditions relative to the corresponding quarter of 2010.
He also credited the economic up-turn to the implementation of some elements of the Growth Inducement Strategy, particularly through the Jamaica Development Infrastructure Programme (JDIP), which recorded total expenditure of $4.2 billion for April to June 2011, the start of the Community Renewal Programme and legislative reforms, including the reduction of stamp duties and estate taxes.
“The country has begun to realize benefits from green-shoots arising from fundamental reform of systems, procedures and processes aimed at mitigating and building economic and infrastructural resilience against shocks, vulnerabilities and other global developments,” he said.
The Director General of the PIOJ also spoke to some of the “fundamental policy reform measures” being implemented. These he identified as: the removal of stamp duty and transfer tax on the trading of registered corporate bonds; reduction of stamp duty on re-financing and transfer of mortgages. During the review period there was a 27% increase in the number of mortgages disbursed by NHT, while the value of these mortgages increased by 83%; the reduction of stamp duty and transfer tax on letters of probates and letters of administration; and the revision of the import duty structure for motor vehicles, to reflect greater consistency with the Common External Tariff.
He emphasized that the recent policy changes complemented previous reform measures implemented during 2009 – 2010, aimed at fundamentally improving the quality of fiscal governance and solidifying “transparency guarantees” that cement a greater level of certainty and credibility in fiscal management.
These include: the enactment and implementation of the Fiscal Responsibility Framework (FRF); the phased implementation of a Central Treasury Management System (CTMS); and the strengthening of public financial management, with the phased roll-out of a Medium-term Expenditure Framework (MTEF), which is now being implemented in 6 prioritized ministries and which account for a significant share of public capital expenditures.
Although pleased with the economic out-turn for the quarter, the PIOJ Chief was cautiously optimistic that the growth trajectory of the past two quarters will continue throughout the remainder of the year, “albeit at a slower rate than previously projected”, because of the expected adverse implications from the downgrade in the US economy and the intensification of the debt crisis in some European countries.
He said that the fiscal adjustments embodied in the forthcoming supplementary budget, are also expected to negatively impact the economy.
CONTACT: Allan Brooks, Senior Reporter