PIOJ offers tentative economic forecast ... After getting March quarter estimate wrong
Published:Wednesday | August 22, 2012 | 12:00 AM
Steven Jackson, Business Reporter
The Planning Institute of Jamaica (PIOJ) yesterday covered both bases in its growth forecast for the September quarter, citing challenges in accounting for the island's economic 'dynamism' and 'modernisation'.
Something is happening in the economy - and the PIOJ wants to better capture it.
The agency mentioned issues of job losses in the fastest growing sectors, declines in construction expenditure, and challenging issues within the informal sector, in particular the lotto scam and tax cheats.
"The economy is going through a transformation. For instance, the sectors growing fastest are also those who are shedding jobs. So what it means that there is a dynamism taking place now and we are trying to stay in front of it," said PIOJ director general Dr Gladstone Hutchinson.
"But we are quite confident that we are bringing the best tools and have the best sense of how the economy is growing .... There is a kind of economic dynamism and modernisation taking place where we are still looking at the structure of the economy that when we modernise it may not be fully captured," he said.
Jamaica shed 11,700 jobs, mostly in construction, over one year ending April 2012, the economic agency said. The unemployment rate ticked up to 14.3 per cent. It was at 14.1 per cent in January.
The forecast for July-September is that GDP could contract as much as 0.5 per cent or grow as much as 0.5 per cent, the agency said. Its estimate for June, the quarter which it reviewed in Wednesday's quarterly briefing, was relatively flat at 0.1 per cent growth.
The biggest drags were the mining sector which contracted 8.7 per cent and construction which declined 3.2 per cent, and on the services side, transport and communication, down 3.5 per cent.
Agriculture was the star performer at 8.5 per cent expansion, followed by tourism, 5. 2 per cent.
In the March quarter, PIOJ had estimated growth of 0.5 per cent. However official data released by Statistical Institute of Jamaica (Statin) revealed that the economy contracted by 0.1 per cent.
"Are we missing something? Probably we are little behind the modernisation of the economy but we are trying to do our best to stay on top of things," said Hutchinson.
The PIOJ projections for the first half of the year were tempered by declines in construction and fall-out of Air Jamaica's contribution to the transport sector.
"In respect to the disparity between our projection and [Statin's], out turn in the quarter the two primary areas were in transportation that was largely due to the impact of the Air Jamaica sale as well as in construction. What we found was a larger than projected contraction in capital expenditure and that negatively impacted on the out turn for the construction industry," said James Stewart, PIOJ acting director of economic planning and research.
"With respect to our current projection in the April to June quarter is lower than initially forecasted largely due to similar factors," he said.
At time, sectoral forecasts were made with only one month's data for the quarter, PIOJ stated.
It means that trend data can violently shift for the remaining months of the quarter. So yesterday, PIOJ's released a forecast range ostensibly ensuring that it will be on the same side as official data once released by Statin.
"In terms of our outlook. We expect real GDP growth from July to September to be in the range of negative 0.5 to 0.5 per cent. Growth will be supported by a tempering in the rate of decline of transport and communication as the impact of the sale of Air Jamaica cycles out," said Hutchinson.
PIOJ also expects continued growth in the telecom sub-sector as the volume of minutes grow due to intensified competition amongst provider; in tourism due to expected strong growth arrivals associated with the Jamaica 50 celebrations; and in agriculture and fisheries, he said.
The downside risks, according to Hutchinson, include rising commodity prices associated with drought conditions in grain producing markets, and an overall slowdown in the global economy.