Economy Continued to Grow in 2006

Despite the setbacks caused by the active hurricane season of 2005, coupled with rising oil prices, the country was still able to experience growth in several areas, such as agriculture, tourism and transportation in 2006.

            This was highlighted in the Planning Institute of Jamaica’s (PIOJ) Economic Update and Outlook for the first quarter of the year from January to March 2006.

            Based on the report, the economy grew by 1.4 per cent with agriculture, transport, storage and communication being the main growth sectors.

            This brought  real growth for the 2005/06 fiscal year to approximately 1.8 per cent, with the services sector estimated to have grown by 1.4 per cent and goods produced increasing by 1.9 per cent. 

            Director General of the PIOJ, Dr. Wesley Hughes, reported that for the period, agriculture, forestry and fisheries grew by some 24.7 per cent. In addition, domestic crop production grew by 18.6 per cent, while export crop production substantially increased by 65.2 per cent.

            Meanwhile, real gross domestic product (GDP) in transport, storage and communication grew by 1.3 per cent, based on increased activities at the island’s ports. This, the PIOJ head said, was evidenced by the increase in the volume of maritime cargo by 5.1 per cent, as well as 8.5 per cent and 3.3 per cent increases in air passenger movement at the Norman Manley International and Sangster International Airports, respectively. 

            Miscellaneous services also trended upwards by 6.6 per cent, with hotels, clubs and restaurants increasing by some eight per cent. Financial and insurance services also grew by 1.2 per cent for the review quarter, on account of the expansion in the volume of activities, associated fees, and commission income.

            Detailing areas of decreases, Dr. Hughes said livestock production declined by some 0.8 per cent, while the mining and quarrying sectors declined by 2.2 per cent.  Even as crude bauxite production increased by 4.7 per cent, alumina production declined by 3.5 per cent due to strike action at the alumina plants, resulting in the loss of production of 19,800 tonnes of alumina, he informed.

            Dr. Hughes further noted that the manufacturing sector declined by 2.1 per cent over the corresponding period in 2005. He explained that although the food, beverages, and tobacco category of manufacturing declined by 5.7 per cent, the other manufacturing component was estimated to have grown by 2.8 per cent, due to the rise in production of petroleum products.

            Construction and installation due to the cement supply constraints, and the resulting closure of construction sites and temporary loss of jobs, declined 6.3 per cent.

            Meanwhile,  inflation for January to March was 0.1 per cent, with spending for housing up by 0.7 per cent, fuels and other household expenses up 2.8 per cent and personal clothing and accessories increasing by 2.8 per cent.

            These increases were tempered by declines in the indices for food, which declined by 1.0 per cent and transportation, which went down 0.3 per cent.

            Dr. Hughes informed further that for the period, there was a fiscal surplus of $8.4 billion, which was less than what was projected, but was $5.8 billion more than what was recorded for the similar period last year. This, he said, was due to revenue being $0.5 billion less than budgeted, while expenditure was $6.5 billion more than budgeted.

            In addition, the monthly average exchange rate depreciated by 1.2 per cent in nominal terms, which translated into a real depreciation of 2.5 per cent.

April to June Performance 

            For the new fiscal year first quarter,  April to June,  Dr. Hughes revealed that the economy grew by some 2.8 per cent as a result of the strong recovery in agriculture and tourism.

            While tourism and leisure grew by 19.5 per cent, with tourists spending some $447 million over the three-month period under review, agriculture was the star performer,  having recovered from a severe drought to record a 17 per cent growth, he noted.

            The mining sector also had a significant turnaround, with a 1.4 per cent increase after two consecutive quarters of decline. Dr. Hughes said that the increased demand for alumina in China, improved mining technologies, and a more stable industrial environment, had favoured a 7.7 per cent increase in bauxite production in Jamaica.

            Manufacturing and construction, however, continued to struggle, as cement production had declined by more than 19 per cent, causing a     corresponding 3.5 per cent drop in activity in the construction sector. Food, beverage and tobacco production also declined by 7.7 per cent. Manufacturing grew by 6.5 per cent, due to operations at the Petroleum Refinery.

            The positive macro-economic performance for the second quarter of the calendar year, Dr. Hughes said, should be seen within the context of a low inflation rate of 2.8 per cent,     stability in the foreign currency exchange rate and increased revenue intake, which was $1 billion more than projected.

            He noted that, the fiscal deficit had performed better than projected… at $2.5 billion less than programmed and $4.5 billion less than recorded in the corresponding period of 2005. This, he argued,  was a move in the right direction.

            According to the head of the PIOJ, the economy grew by some 2.7 per cent for the  third quarter of  the  year (July to September 2006), relative to the corresponding period in 2005.

            The growth, he said, took place against the background of relative stability in the exchange rate market, with inflation being at 2.4 per cent and a fiscal deficit of $8.4 billion, which was $2.5 billion less than    budgeted.

            Agriculture and tourism were cited as being the star performers for the period, with growth of 9.6 per cent and 16.1 per cent, respectively.

            The financial and insurance    services grew by 2.0 per cent and there was also marginal growth of 0.7 per cent in the mining and quarry    sectors, while manufacturing went down 2.6 per cent, with food, beverage and tobacco production declining by 4.2 per cent.