Derick Latibeaudiere, Governor BoJ. - RUDOLPH BROWN/CHIEF PHOTOGRAPHER
BANK OF Jamaica (BoJ) governor Derick Latibeaudiere says the central bank is expecting the economy to show improvement in the first three months of this year.
The bank is expecting that the positive developments observed in the December quarter will continue into the March quarter of 2006, he said. He was speaking at the bank's quarterly press briefing at its downtown Kingston headquarters yesterday.
"We are forecasting strong economic growth and moderate inflation for the period," he said. "We are also anticipating that as inflation expectations subside, the foreign exchange market will experience less volatility."
It is expected that growth in the March quarter will be dominated by continued strong recovery in agriculture, particularly in domestic agriculture. In addition, construction is forecast to continue to record strong growth partly associated with increased investment in public infrastructure and the preparations to host the Cricket World Cup in 2007.
MANUFACTURING TO ACCELERATE
The bank also expects growth in manufacturing to accelerate, related to developments in sugar and in the agro-processing industry. Miscellaneous Services, which is dominated by tourism, should also perform well in this quarter.
With the strong influence of agricultural prices on the Consumer Price Index, the bank is expecting that the continued recovery in domestic agriculture will counteract other influences on inflation in the March quarter. He said, "In revisiting our November forecast we have taken account of the impact of the recent increase in the national minimum wage as well as recent movements in international oil prices. We also anticipate price impulses from adjustments in rental rates and insurance premiums in addition to the lagged effects of the recent depreciation in the exchange rate. However, in spite of these considerations we expect inflation to be moderate in the March quarter."
Based on the outlook for the March quarter and the low out-turn for the December quarter, "we have revised our inflation forecast for the full fiscal year downwards to a range of 12.5 per cent to 13.5 per cent. In this context we are also expecting the downward trend in core inflation to continue."
With inflation slowing, the expectation is that concerns about real returns on Jamaica dollar assets should moderate and that relative stability will return to the foreign exchange market, he stated. Increased flows to the market from the earners of foreign exchange should contribute to stabilise.
With the favourable developments that are anticipated, the monetary targets for the March quarter should be comfortably met and the foundation set for a return to annual single digit inflation in the near-term, he stated.
