Mon | Oct 22, 2018

Weak economic performance pushes Gross Domestic Product lower

Published:Wednesday | February 25, 2015 | 12:00 AMMcPherse Thompson
James Stewart (left) director, Economic Planning, Research and Policy Logistics Division at the Planning Institute of Jamaica (PIOJ); Collin Bullock, director general; and Richard Lumsden, deputy director General, Economic, Planning and Policy Ligistics Division at the PIOJ, at the quarterly press briefing at the PIOJ, New Kingston, yesterday.

The Planning Institute of Jamaica (PIOJ) has confirmed that there was a 0.3 per cent contraction in the economy during the October to December 2014 quarter, the second consecutive period of decline.

The contraction is expected to push real gross domestic product (GDP) growth for fiscal year 2014-15 within a range of zero to one per cent, even as the PIOJ projects economic growth of 0.5 per cent to 1.5 per cent for the January to March 2015 quarter.

PIOJ Director General Colin Bullock said the performance largely reflected lower value added for the goods -producing industry due to lagged impact of drought conditions specifically on agriculture.

It also represented lower-than-anticipated alumina production due to technical challenges, longer-than-anticipated closure of the Petrojam oil refinery and slower-than-anticipated implementation of public- and private-sector construction projects.

"Despite these challenges, developments in the global economy positively impacted several aspects of the domestic economy," Bullock said.

"Strengthening of growth in the economies of our main trading partners resulted in high remittance inflows and increased demand for some goods and services, in particular tourism," the director general told a press briefing in New Kingston yesterday as he reviewed the economic performance for the quarter to December 2014.

The goods-producing industry contracted by 3.7 per cent, with all industries, except construction, registering declines in real value added during the review quarter, he said.

"This performance largely reflected the impact of drought conditions and plant downtime, as well as technical challenges experienced at some industrial plants," he said.

Agriculture, forestry and fishing declined by an estimated 11 per cent relative to the corresponding quarter of 2013.

However, Bullock was bullish on the short-term prospects for the Jamaican economy for January to March 2015, noting that the positive assessment was based on the continued strengthening of production activities, particularly in the goods-producing industries.

"Return to growth is expected for the agriculture and manufacturing industries, while continued strengthening is projected for the construction industry," he said, adding that the services industry was also expected to record growth.

Supporting their expectation, he said, was that they had preliminary data on tourism indicating that airport arrivals and cruise passenger arrivals for January 2015 grew by seven per cent and 11.5 per cent, respectively.

"The anticipated strengthening of confidence levels and greater stability in the macro-economic environment are also expected to contribute to the resumption of growth," the director general said.

In addition, greater stability in the economy has been reflected in deflation of 0.5 per cent for January 2015, the main drivers during January being lower international crude oil prices on domestic energy and transportation costs, as well as the increased supply of vegetables in the food division of the consumer price index.

But Bullock pointed out that "these growth-inducing factors have been partially counteracted by public-sector capital expenditure contraction for the first three quarters of the fiscal year 2014-15."

According to the PIOJ, Jamaica also recorded deflation - a reduction in the All Jamaica Consumer Price Index - of 0.8 per cent during the quarter under review.

Deflationary pressures emanated mainly from reduced prices in the food and non-alcoholic beverages divisions, down 0.5 per cent; housing, water, electricity, gas and other fuels, down 4.5 per cent; and transport, down 1.7 per cent.

Lower prices for the quarter reflected an increase in agriculture supply subsequent to severe drought conditions during June and July 2014 and the pass-through effect of lower global crude oil prices.