Growth in Q2 suggests possible recovery of whole economy
All industries in the goods-producing sector as well as the services sector, except government services, expanded in the second quarter of the calendar year, possibly indicating a recovery of the whole economy, and not just for the traded sectors.
It is a development which co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles, believes Jamaicans are seeing for the first time, where all the industries which make up the country's gross domestic product (GDP), except government services, have shown growth in a single quarter.
"What we have seen in the past is that tourism grows, agriculture grows sometimes and then it retreats a bit, construction has been fairly stable, but generally you don't find all of the industries growing. And this is the first quarter, Q2, where all industries grew except government services," Byles explained.
He said the Statistical Institute of Jamaica reported that GDP grew by 0.6 per cent in the second quarter, noting that that was in addition to the 0.4 per cent growth in the quarter to March.
In releasing the 29th communiquè of the non-public sector members of EPOC at a press briefing Thursday, the EPOC co-chair said that for the fiscal year to August the government recorded a primary surplus of $32.8 billion, exceeding the budget by $5 billion.
The net international reserves came in at US$2.44 billion, nearly US$1 billion more than the International Monetary Fund target of US$1.45 billion for the end of September.
Total revenue was $1.3 billion or 0.8 per cent below the target, but tax revenue of $158.8 billion was ahead of target by $1.7 billion. "We are not accustomed to this and it's a very pleasing thing to see," said Byles, noting, however, that it was $22.3 billion more than the revenue collected during the same period last year.
"It seems to me that in terms of the budgeting and in terms of the compliance the tax people are getting it right, more than they were getting it before," he said.
Company tax, which he considered to be an important weathervane, was ahead by $2 billion and 28 per cent more than last year.
"So, if businesses are making money they pay taxes, and if the taxes are ahead of last year by 28 per cent and ahead of budget by $2 billion, then I think that augurs well in terms of perhaps growth in the economy," Byles said.
The Government spent $11 billion less than the budget, most of which was accounted for by savings of $4.7 billion on interest and $3.5 billion less on wages.
However, both of those categories will catch up to budget as the bond-raising expenses and the public-sector wage increases are paid.
The increase in the wage bill for fiscal year 2015-16 is expected to be about $9.3 billion more than anticipated.
"So they are going to have to find places to take back that $9.3 billion," said Byles in reference to the Government. "Alternatively, they can tax us more, but I would suggest they don't do that."
According to the communiquè, the Bank of Jamaica reported that for the June 2015 quarter there was a current account deficit of US$85.5 million, representing a US$185.3-million improvement relative to the corresponding period in 2014.
The current account balance for the January to June period improved by US$353.2 million to a deficit of US$44.8 million relative to the previous corresponding period. It said that while food imports have decreased, the improvement was largely the result of lower oil prices "and is therefore subject to reversal if world prices rise again".
Notwithstanding that, the implication of the positive out-turn is a significant reduction in the demand for foreign currency for merchandise imports, said the communiquè.