Jamaican economy slows in 3Q
- PIOJ outlook bullish on election spending, backpay
McPherse Thompson, Assistant Editor - Business
Jamaica experienced GDP growth of 0.5 per cent for the quarter to September, attributed largely to continued expansion in the mining, agriculture and construction sectors, as well as the positive impact of the controversial JDIP road project.
Although the performance represented the third consecutive quarter of expansion in the economy since the recession broke in 2010, it was a marked slowdown compared with the 1.6 per cent growth and 2.1 per cent recorded in the January to March and April to June quarters.
Planning Institute of Jamaica Director General Dr Gladstone Hutchinson, giving a review of the island's economic performance at a briefing in New Kingston on Wednesday, said the slowdown was anticipated because the forecast of 0.5 to 1.5 per cent growth for the July to September quarter was predicated on the reopening of the Kirkvine alumina plant in Manchester.
The plant's delayed reopening was again pushed back from October because of a projected weakening of aggregate demand and a fall in prices, Hutchinson said.
In addition, tourism, a key industry which he said showed resilience in economic activities during the recession, was adversely impacted by global developments and saw a decline in stopover arrivals and a general slowing in its economic activities.
The PIOJ is forecasting growth of one to two per cent for the October to December quarter.
Hutchinson said growth in the July to September quarter was attributed to the continued expansion in mining and quarrying, agriculture and construction, as well as a return to positive outturn for some other industries. The Jamaica Development Infrastructure Programme, or JDIP, positively impacted the performance of the construction industry, particularly through a boost in the civil engineering component, he said.
Real value-added in the goods-producing industry grew by an estimated 1.8 per cent, while the services sector fell by an estimated 0.2 per cent.
The director general said the decline in services was largely due to the transport, storage and communication industry consequent on the sale of Air Jamaica and a decline in air-passenger traffic during the quarter.
In the goods-producing sector, all industries with the exception of manufacturing registered increased real value-added during the review period.
The agriculture, forestry and fishing industry grew by an estimated 2.5 per cent, largely reflecting increased output for the subcategories traditional export crops, up 5.2 per cent; other agricultural crops, up by 4.1 per cent and post harvest activities up 4.7 per cent.
Hutchinson said the improved performance in agriculture was due to more favourable weather conditions which facilitated higher production levels compared with the corresponding quarter of 2010. Total hectares of domestic crops reaped during the review period increased by 6.9 per cent.
The improved performance was also attributed to continued benefits from major replanting efforts by farmers, with support from the Ministry of Agriculture following the impact of Tropical Storm Nicole in September 2010. It was also linked to the ministry's provision of support to farmers in areas of marketing, irrigation and extension services aimed at improving productivity.
Real value-added for mining and quarrying grew by 7.5 per cent, largely reflecting the continued impact of the reopening of the Windalco Ewarton Alumina Plant and increased bauxite production by Noranda Bauxite Company in St Ann.
Manufacturing declined by an estimated 0.2 per cent, the net result of a 3 per cent decline in food, beverages and tobacco and an increase of 3.2 per cent in other manufacturing, Hutchinson said.
With respect to food, beverages and tobacco, the decline in output was driven mainly by a contraction in sugar production, down 13.6 per cent; poultry, down 5.9 per cent; rum and alcohol, down 8.2 per cent; and beer and stout, down 14.5 per cent.
The performance of the services industry was largely constrained by the downturn in activities in the transport, storage and communication, and finance and insurance industries. All other industries were estimated to have grown.
Transport, storage and communication declined by three per cent due largely to the decline in the transport and storage component. Activities at airports declined with total air-passenger movements down by 3.8 per cent due to a 10 per cent fall in passenger movements at the Norman Manley International Airport in Kingston, and 0.2 per cent at Sangster International in Montego Bay.
The finance and insurance industry contracted by one per cent, primarily due to reductions in the net interest income on loan stock at deposit-taking institutions and a decline in fees and commission income.
The stock of loans and advances outstanding at commercial banks totalled J$253.7 billion, an increase of 0.6 per cent compared with the end of September 2010.
In forecasting continued growth for the October to December quarter, Hutchinson said "the impact of current global economic developments on the Jamaican economy is expected to be negative as the slower-than-expected growth in the economies of the island's main trading partners will weaken external demand for Jamaican goods and services."
However, he said the expected restraint oncommodity prices throughout the remainder of the year would constrain domestic inflation and the import bill.
In the coming months, he said, domestic economic performance could be boosted by a strengthening in demand arising from increased expenditure associated with the intensification of election campaigning.
The industries likely to be impacted include transport, storage and communication as well as manufacture and the wholesale and retail trade.
There could also be increased consumption from the second tranche of retroactive salary payments of J$1.35b to $1.45b to public-sector workers, he said.