BoJ predicts inflation of 8-11 per cent next year
Friday | February 22, 2008
The Bank of Jamaica building, Nethersole Place in Kingston. - File
The central bank projects that inflation for the fiscal year ending March will top 17 per cent, but expects the rate of price increases to more than halve during 2008/09 financial year.
Bank of Jamaica (BoJ) governor Derick Latibeaudiere forecast inflation in the fiscal year ahead at 8-11 per cent at a briefing of market analysts on Wednesday.
He noticeably did not provide a projection for economic growth, which the government's medium-term forecast expects to be around three per cent.
In the current quarter, the central bank's most precise reading on growth was to label the prospects as "positive."
The latest data, up to December, from the Statistical Institute (Statin), which is the official arbiter of economic performance, put inflation for the calendar year at 16.8 per cent, while the fiscal year figure was 14 per cent at December.
Latibeaudiere at his briefing said central bank technocrats expected inflation in the first quarter of this year, to run at around 3.5 per cent as "the events of 2007 dissipate".
These events include mid-year storms followed by floods, later on, which played havoc with domestic agriculture, causing food prices to rocket.
Affected by oil prices
Rising prices for oil and other commodities exacerbated the situation.
On that basis, if Latibeaudiere's forecast holds true, inflation for the 12-month period to the end of March would be in the region of 17.5 per cent, although the BoJ governor says that the figure could shift a half a point either way.
But the BoJ expects better inflation news for the fiscal year, which begins in April, projecting that the consumer price index would likely shift between eight per cent and 11 per cent.
"The bank's good forecast on the lower end is about 8.1 per cent," Latibeaudiere said.
"But at the upper end we are taking into account all manner of things including extreme oil prices and maybe a little weather conditions (and) commodity prices ..."
Ironically, it is an issue of concern for Jamaica that could help it to weather the inflationary pressures of the past year - a global economic slow-down.
Economists fear that a recession, especially in the United States, could hit the island's tourism industry - over 70 per cent of Jamaica's tourists come from the United States - while slower growth in China and the other robust Asian economies could negatively impact the alumina refining.
Increasing joblessness or a fear of recession in North America and Britain might also cause Jamaicans who remit billion of dollars to the island annually to be more circumspect about how they part with their cash.
But slower growth or recession in those economies will also mean less robust consumption of commodities and, perhaps, cheaper prices. That, in a way, is good for Jamaica.
Explained Latibeaudiere: "We expect that the slow-down in world growth should help to restrain prices in the international commodity markets.
"In this context inflationary expectations should subside and with a tight rein on domestic monetary expansion, inflation should gradually tend towards single digit by end of financial year 2008/09."