Statement to Parliament by Dr. the Hon. Peter Phillips Minister of Finance and Planning

INTRODUCTION

• The House is reminded that late in December 2013 the Government of Jamaica laid in this Honourable House the Fiscal Policy Paper – Interim Report and an adjusted Letter of Intent and Memorandum of Economic     and Financial Polices (MEFP).

• I wish to make some comments on both documents, and I will also use this opportunity to provide an update on the economy and the challenges confronting us in the New Year.

UPDATE ON THE ECONOMY FISCAL PERFORMANCE -APRIL 2013-NOVEMBER 2013

CENTRAL GOVERNMENT PRIMARY SURPLUS AND FISCAL DEFICIT

• Fiscal performance has remained resilient throughout FY 2013/14, with Central Government primary surplus and budget deficit targets, all being met.
  • Provisional information indicates that the Central Government primary surplus to November 2013 amounted to $42.5 billion.

• This continuing fiscal consolidation effort bodes well for the attainment of the key primary surplus target of 7.5% of GDP for FY 2013/14 and over the medium term.

GROWTH

• STATIN has reported that there was REAL GDP GROWTH of 0.5 per cent in the September 2013 quarter following a decline of 0.2°/o for the preceding quarter. This expansion largely reflected increased output in Agriculture, Forestry & Fishing, Mining & Quarrying, Construction and Hotels & Restaurants.

• Specifically, for the December and March quarters, the projection is for growth to continue and indeed to strengthen.

INFLATION

• With respect to INFLATION, the trajectory for the fiscal year to date has shown that inflation has been in line with projections. Ini ation for the calendar year 2013 was 9.6 per cent. For the FY 2013/2014, we are projecting an inflation outturn in single digits.

EXTERNAL ACCOUNTS

• On the issue of the EXTERNAL ACCOUNTS, estimates for the fiscal year to September 2013 indicate that there was an improvement in the current account deficit relative to the corresponding period of FY2012/13.

• For the fiscal year to September 2013, the current account deficit was estimated at US$678.7 million, which represented a reduction of US$347.8 million (or 33.8 per cent improvement) when compared to the corresponding period in FY2012/13.

• This positive development was reflected in the performance of nearly all sub-accounts. The Goods & Services sub-account recorded the greatest improvement of US$294.8 million due mainly to a reduction in imports. This trend is expected to continue for the rest of the fiscal year.

NET INTERNATIONAL RESERVES

• Against the background of estimated improvements in the balance of payments to end­ December, the net international reserves increased to US$1052.8 million at end-2013 relative to US$884.3million at end-March 2013. This met the IMF target.

• Further improvement, in line with the IMF Programme target, is expected by end-March 2014 due to programmed inflows from multilateral institutions and improvements in net private capital flows.

FISCAL POLICY PAPER: INTERIM REPORT- MAIN POINTS

• Members of the House will recall that the Financial Administration  and Audit (FAA) (Amendment) Act, 2010, requires that upon presentation of the annual Estimates of Revenue and Expenditure, the Minister shall lay before both Houses of Parliament, a Fiscal Policy Paper (FPP) setting out,

(a)  a Macroeconomic  Framework;

(b)  a Fiscal Responsibility Statement; and,

(c)  a Fiscal Management Strategy.

• The FAA Act also requires the Minister to lay before each House of Parliament, at least twice in each financial year, a report on the performance of the economy, the public finances  of Jamaica and the actions taken under the Fiscal Management Strategy.

• Further, Regulations developed to support the FAA Act requires the Minister to table  before each House of Parliament, an Interim Report that shall:

o            Focus primarily on the mid-year outturn, the implications for the remainder of the financial year and the medium term arrangements under the programme;

o            Provide information which will inform discussions relating to the ensuing financial year while providing a preliminary and indicative view of that year’s estimates of revenue and expenditure; and,

o    Present expenditure data at a relatively aggregate level.

• This first interim report which covers the six month period April to September 2013 was presented to Parliament to satisfy this requirement. Additionally, it serves to engender active debate and participation in the management of the public finances of Jamaica and the performance of the economy.