Tax revenues outperform target
Tax revenues were $6.2 billion better than projected in the Government's budget for the fiscal year to November 2015, a new phenomenon that should position Jamaica to hurdle the 11th quarterly IMF test, said co-chairman of the Economic Programme Oversight Committee (EPOC) Richard Byles.
The country also continued to outperform in the main fiscal and monetary targets under the economic support programme with the International Monetary Fund (IMF), producing a primary surplus target for the period of $55.8 billion, or $5.3 billion better than budgeted, and Net International Reserves of US$2.44 billion, $800 million ahead of the IMF's end-December 2015 target of US$1.64 billion.
With actual tax revenues totaling $256.3 billion against the Government's budget of $250.1 billion, Byles said, "We have seen this trend develop, I would say, from about September last year, where the tax revenues are hitting the target and eventually surpassing it, a new phenomenon and a welcome one. If we can keep that up, I think we will be in good stead for the December test."
Tax on interest outperformed by $4.2 billion; Special Consumption Tax (SCT) by $2.9 billion; General Consumption Tax (GCT) by $1.8 billion; and company tax by $1.4 billion.
"When you see the sales taxes - SCT and GCT - and the company taxes outperforming, I think that says something about business activity that's picking up somewhat, picking up more than was planned, I guess you could say," Byles told a press briefing in New Kingston, where he released the 32nd communiquÈ of the non-public sector members of EPOC on Tuesday.
The main laggards were Customs duty, $0.9 billion less than budgeted, and telephone tax and tax on dividends, both $0.6 billion below target.
Revenue from grants continued to lag budget by $3.3 billion, largely the result of capital projects being executed later than projected.
Expenditure for the period April to November was $8.3 billion below budget, of which $4.9 billion was savings on interest. Capital expenditure also lagged budget by $4 billion, or 16 per cent.
Byles said that the only segment of the goods-producing sector that did not grow during the quarter to September 2015 was mining, which contracted by 0.9 per cent.
"It is somewhat concerning because mining is a significant contributor to GDP - not as big as it used to be, but significant - and I think that the plans for growth depend upon the mining sector picking up somewhat," he said.
So far, the hope that Alpart would reopen "hasn't materialised, so the mining contribution to GDP is not what was expected, and I expect, therefore, that the growth may be a little softer than was expected," the EPOC co-chair said.
Inflation for the fiscal year to December stood at 4.3 per cent. During the same period, the Jamaican dollar depreciated "a little more than the inflation rate" - approximately five per cent - improving the country's competitiveness against the US dollar by 1.3 per cent.
Noting that Jamaicans appear to believe that this is the only country that is devaluing its currency, Byles presented data on selected trading partners, which show that in 2015 the euro fell against the United States dollar by 10.2 per cent, the Canadian dollar by 16 per cent, the British pound sterling by 5.4 per cent, the Chinese yuan/renminbi by 4.3 per cent, the Japanese yen by 0.3 per cent, the Brazilian real by 31.8 per cent, the Mexican peso by 14.3 per cent, and the Trinidadian dollar by 0.9 per cent.
When currencies in Jamaica's trading partners depreciate against the USD, "if ours doesn't move, it means that we are not as competitive as them. So when you look at our 'devaluation' versus the US, that's step one, but you also have to look at all the other major trading partners' currencies," Byles said.
"Just like in business or in soccer, you have to be watching your competitor. It can't be just what you are doing. It has to be what you are doing vis-‡-vis your trading partners and your competitors."