Tue | Dec 10, 2019

Alpart and trade war weighing on Jamaica - Economy barely grows at 0.3% in September quarter

Published:Wednesday | November 20, 2019 | 12:32 AM
Dr Wayne Henry, director general of the Planning Institute of Jamaica.
Dr Wayne Henry, director general of the Planning Institute of Jamaica.

The Jamaican economy grew marginally by 0.3 per cent in the September quarter, performance that the Planning Institute of Jamaica, PIOJ, said was impacted by the closure of the Alpart alumina refinery in St Elizabeth.

The positive drivers for the period included: increased domestic demand, pushed by record levels of employment; increased consumer and business confidence levels which spurred investment and consumer demand; and continued stability in the macroeconomy, PIOJ director general Dr Wayne Henry reported on Tuesday.

Those were tempered by drought conditions which negatively impacted the performance of some industries, particularly agriculture, forestry and fishing, and electricity and water.

The operational closure of the Alpart alumina refinery during the period resulted in a sharp contraction in the mining and quarrying industry.

Jamaica is also feeling the impact of the trade war between the United States and China, which the PIOJ said has resulted in the slowing of economic growth in some of the more advanced economies. That in turn is impacting external demand for Jamaica’s goods and services, particularly for the mining and quarrying, and hotels and restaurants industries.

Growth was also stymied by the delayed start-up of some of the major infrastructure projects which are scheduled to commence during this fiscal year, said Dr Henry in his quarterly review of economic performance.

The main challenges in implementation include procurement delays and slow mobilisation.

“This has resulted in a slowing in growth, particularly for the construction industry in which several projects that were initiated in 2018 or earlier have ended or are in the process of winding down,” he said.

The goods producing industry contracted 2.1 per cent in the quarter, due mainly to the 18.5 per cent downturn in mining. 1.5 per cent decline in construction, and 0.2 per cent for agriculture. Manufacturing bucked the trend with growth of 1.6 per cent.

The performance in the agriculture sector reflected the combined effect of traditional export crops which declined by 5.7 per cent due to a contraction in output for sugarcane, down 57.3 per cent, with only one of the four factories being in operation for only a week during the quarter. Banana production also fell by 3.4 per cent.

Growth in service industry

The services industry is estimated to have grown by 1.2 per cent, reflecting higher real value added in all industries. The electricity and water supply industry grew by 0.7 per cent, with a rise in electricity consumption that outweighed a contraction in water consumption due to drought.

The transport, storage and communication industry grew by 1.0 per cent due to an increase in air passenger movements, consistent with higher levels of stopover arrivals as well as an increase in maritime cargo.

The hotels and restaurants industry was up 2.3 per cent, reflecting an increase in visitor arrivals.

Cruise passenger arrivals declined by 25.6 per cent, largely reflecting decreased arrivals to all major ports: Ocho Rios was down 21.7 per cent, Montego Bay down 47.1 per cent, and Falmouth down 10.5 per cent. However, visitor expenditure increased by 5.7 per cent to US$838.6 million.

For the calendar year to September the economy is estimated to have expanded by 1.2 per cent, reflecting a 0.1 per cent increase for the goods producing industry and 1.6 per cent for the services industry.

Preliminary data showed that for October airport arrivals increased by 7.4 per cent while cruise passenger arrivals declined by 16.9 per cent. For the same month electricity consumption increased by 4.5 per cent, and electricity sales by 4.6 per cent.

For the period, total bauxite production contracted, reflecting the impact of a 58.7 per cent decline in alumina and a 6.3 per cent decrease in crude bauxite production.

The PIOJ is projecting real growth within the range of zero to 1.0 per cent during the October to December quarter.