Wed | May 27, 2020

Economy contracts 0.6%

Published:Wednesday | December 31, 1969 | 7:00 PM
Acting director general of the PIOJ, Everton McFarlane, addressing the media at the PIOJ's quarterly briefing on the economy, on Thursday, February 21. At right is Richard Lumsden, programme director for the Plan Development Unit. - Ricardo Makyn/Staff Photographer

The Jamaican economy contracted by an estimated 0.6 per cent during the October to December 2012 quarter, the Planning Institute of Jamaica (PIOJ) said Thursday.

It followed a trend in which the country recorded the three previous quarters of negative growth and has resulted in a 0.3 per cent decline in real GDP for the calendar year 2012.

The outrun largely reflected the impact of a weak global economic environment, continued weak domestic demand conditions heavily influenced by weak business confidence, as well as adverse weather conditions, specifically the prolonged effect of drought during June and July which affected the productivity of short gestation crops.

Contraction in the growth rate was also influenced significantly by losses and damage caused by Hurricane Sandy in October, PIOJ Acting Director General Everton McFarlane announced during a review of the country's economic performance at a briefing at the PIOJ offices in New Kingston.

"In light of the weak economic performance during the last four quarters and against the background of a sustained period of no economic growth, the government is resolute in implementing strategies to facilitate sustained real GDP growth over the medium to long term," said McFarlane, in his first presentation of the review since former PIOJ head Dr Gladstone Hutchinson exited the position less than a month ago.

Growth-inducement strategy

The foundations of that growth agenda are elaborated in the PIOJ's growth-inducement strategy, outlined on previous occasions, he said, and captured in the policy agenda currently being negotiated with the International Monetary Fund.

McFarlane offered no analysis on the expected effects of the National Debt Exchange but said it was a necessary programme.

For the calendar year 2012, real GDP was estimated to have declined by 0.3 per cent, despite five industries recording growth during the period. Those with the largest increases were agriculture, forestry and fishing, up 2.9 per cent and hotels and restaurants, rising by 1.5 per cent.

Inflation for the October to December period was 2.6 per cent, attributed mainly to increased prices in food and non-alcoholic beverages, up 4.3 per cent, and in the category housing, water, electricity, gas and other fuels, up 3.5 per cent.

The movement in prices for the period reflected increased costs for domestically produced agricultural products attributed to adverse weather, as well as higher expenditure for grains on the international market.

The PIOJ reported that there was a fiscal deficit of J$16.7 billion during the review quarter, J$6.7 billion more than budgeted. This was attributable to revenue being J$7.9 billion lower than programmed, which it said was tempered by a J$1.2 billion lower-than-budgeted expenditure.

Among the few industries recording growth during the quarter was finance and insurance services, up one per cent, mainly because of an increase in net interest income on the stock of loans at deposit-taking institutions, but also because of increases recorded for fees and commission income.

Higher unemployment

Based on the labour force survey undertaken by the Statistical Institute of Jamaica, the unemployment rate in October 2012 was 13.7 per cent, 0.9 per cent higher than July 2012, the PIOJ said.

The institute is projecting GDP for the January to March 2013 quarter to be within the range of zero and one per cent, partly based on economic data for last month.

Total bauxite production declined by 10.2 per cent in January, reflecting the combined effect of an 8.2 per cent reduction in alumina production and 5.7 per cent fall in crude bauxite production. However, the institute is banking on production resuming at the Ewarton Plant in St Catherine during the current quarter.

In January, electricity generation and sales increased by 2.2 per cent and 3.9 per cent, respectively, a turnaround partly from the decline in the October to December 2012 quarter.

Data indicate that cruise passenger arrivals grew by 8.9 per cent in January, apparently set to reversing the 12.8 per cent decline for the three months to December 2012.

The PIOJ said inflation for January was 0.7 per cent, reflecting mainly increases in food and non-alcoholic beverages, up 0.8 per cent because of higher prices for starchy foods, milk, cheese, eggs, bread and cereals.