Jamaican economy contracted in September quarter, says BOJ
After four consecutive quarters of growth, the Jamaican economy is estimated to have contracted in the September 2014 quarter, largely due to the impact of drought on agricultural crops and production of water, said Brian Wynter, governor of the Bank of Jamaica (BOJ).
The central banker did not state the level of contraction, but the Planning Institute of Jamaica is expected to release its estimate today.
The BOJ governor said the economy is projected to recover at an accelerating pace over the next four quarters, starting in December.
Speaking at his quarterly briefing on monetary policy and the economy on Tuesday, Wynter also said the country's balance of payments is expected to continue improving.
Preliminary data shows that tourist arrivals for the fiscal year to the end of October rose by 5.3 per cent, stronger than the 3.2 per cent recorded for the corresponding period last year.
And: "We are also seeing a strong recovery in net remittance flows, which grew by five per cent for the first four months of this fiscal year," the BOJ Governor said.
Within the quarter, Wynter said the central bank refined its liquidity management framework during the quarter by removing limits on overnight funding available under the standing liquidity facility, increasing the allocation at the bimonthly repurchase operations and streamlining the interest rates charged for those facilities.
He said greater assurance on the part of deposit-taking institutions about their liquidity is expected to translate into increased private sector credit, higher levels of investment and stronger economic growth.
In the calendar year to September, the BOJ carried out special operations that provided $172 billion of liquidity to deposit-taking institutions.
"However, at this point, the results are not encouraging as private sector credit grew by only 4.8 per cent for the 12 months ending September 2014 and 0.9 per cent in the September quarter alone," he said.
In contract, gross foreign direct investment (FDI) inflows doubled to 5.3 per cent of GDP in fiscal year 2013/14 from two to three per cent per annum in the three preceding fiscal years.
FDI inflows are forecast to be similarly strong in fiscal year 2014-15, Wynter said.
"It is worth observing that the relative buoyancy in externally driven investments occurred before Jamaica demonstrated its capacity for sustained commitment to the programme of difficult reforms," the Governor said.
"This bodes well for future growth as investors take account of the mounting evidence of the government's commitment to growth-oriented reforms," he said.
Wynter said the resilience of Jamaica's inflation environment was tested in the September quarter as the effect of the drought proved to be more than anticipated, driving sharper increases in the prices of some domestic agricultural items.
As a result, annual inflation rose to nine per cent, compared to eight per cent at the end of the previous quarter.
The forecast for inflation for fiscal year 2014-15 remains in the seven to nine per cent range.