Primary surplus surpasses target
Jamaica comfortably surpassed the primary surplus target in the first month of the current fiscal year as key macroeconomic indicators, including the net international reserves (NIR), continue to trend in a positive direction, said Richard Byles, co-chairman of the Economic Programme Oversight Committee (EPOC).
For April, the country recorded a primary surplus of $6 billion, compared to a target of $3.6 billion.
"So, for the first month of the fiscal year, we are out of the blocks very fast," Byles said.
"When we dive a little further to understand the performance of this primary balance, we see a couple interesting things. First of all, tax revenues have performed well. That is a big plus. So following on last fiscal year's performance which was good, April, which is like the opening batsman of the team, has performed very well too," he said.
The NIR stood at US$2.3 billion at the end of May, ahead of the June International Monetary Fund (IMF) target of US$1.81 billion, Byles told a media briefing at Sagicor Life Jamaica, New Kingston, on Thursday where he released the 37th EPOC communique.
He said that fiscal year 2016-17 started with revenues and grants of $34 billion, ahead of the target of $33.8 billion.
On the expenditure side, there was a $2.5-billion underspend on the recurrent side and about $0.5 billion on the capital side.
"This was so mostly because no budget was approved in April, so there was no guideline for expenditure and so the Government was conservative in how it entered into new contracts and spent funds," he said.
However, he said that with the recent approval of the Budget, "you will see, as this quarter goes along, the expenditure side will catch up with the budgeted numbers."
Byles referred to data released by the Statistical Institute of Jamaica, which show that inflation for April was -0.4 per cent, "the fourth consecutive month in a year that we have had a minus inflation figure" and for the calendar year to date, the inflation rate is negative 1.7 per cent.
"This is good news for consumers generally. Normally, that figure is positive," he said, recalling there were times not long ago when Jamaica had inflation rate of between 11 and 13 per cent or more.
"So it's quite a phenomena for us to be experiencing negative inflation," he said. The trailing 12-month inflation, that is, April 2015 to April 2016, is 2.4 per cent. "So even on a 12-month basis, it's really quite low. That number 2.4 per cent sounds almost like First World," Byles added.
He said that as a result of the persistently low inflation, the Bank of Jamaica lowered its 30-day certificate of deposit rate from 5.25 per cent to 5.0 per cent.
"So Bank of Jamaica is saying, my expectation about inflation looking forward is quite conservative, quite modest. I don't think inflation will get up to anything above five per cent, maybe even lower," he explained.
Byles noted that in nominal terms, credit to the private sector for the 12 months, ending April 2016 increased by 10.5 per cent, but in real terms by 7.9 per cent.
"Over the last 12 months the credit that has been extended to the private sector in real terms is eight per cent more than the same period the previous year. It means that the private sector is borrowing more and they are either using those funds for investment or consumption," he said.
"It's a barometer of the state of health of the economy, the outlook, the confidence when the private sector each year is borrowing more and more," he said, adding that "that is an indicator I think that is useful to watch".
Referencing Statin data which show that there was a decline in the mining and quarrying industries in the fourth quarter of 2015, Byles said, "I can't stop marvelling at this. It used to be a star performer for Jamaica. It used to drive our growth. It used to be an important source of skilled employment, and now it is almost down to nothing and continues to reverse itself."
He added: "So the challenge that we have as Jamaicans is to replace that mining and quarrying contribution that used to be made, and we have to replace it pretty fast."
Byles noted that Jamaica has gone through a general election and a change of administration but the economy remained on track. "I think this is excellent news and a sign of maturity," he added.