Fiscal, monetary indicators outperform targets ... but more economic growth needed
The primary surplus, one of the critical indicators of the Government's financial performance, was $3.4 billion for April to May 2014, better than the budgeted deficit of $1.6 billion, co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles, revealed on Monday.
The Net International Reserves (NIR) at June was US$1.37 billion, some US$223 million more than the target, while tax revenues during the same period was $50.3 billion, exceeding the target of $48.4 billion, he said.
The fiscal deficit of $12.6 billion was also ahead of the budgeted deficit of $17.6 billion, Byles told a news conference at Sagicor Life Jamaica in New Kingston where he released the 14th communiqué of EPOC, the body overseeing Jamaica's economic programme with the International Monetary Fund.
"We don't have data on the primary balance for June, but the financial secretary (Devon Rowe) did say to EPOC that he was pretty confident that we would meet the June target," he said.
The communiqué said preliminary balance of payments data released by the Bank of Jamaica for the quarter to March 2014 show a substantial improvement of US$300.6 million in the current account deficit relative to the same period last year. The current account deficit is the difference between exports and imports of goods and services as well as net income and transfer flows.
import high, export low
"As we know, in Jamaica the fundamental problem that we have in the economy is that we import a whole lot more than we actually export. When you take that deficit as a percentage of our gross domestic product you end up with a number like 14.8 per cent, which we did in 2012; 11.5 per cent, which we did in 2013, and 8.8 per cent, which we did this year (2013-14). So there is a continuous improvement in the current account deficit over the last three years," he said.
Byles said the level of current account deficit Jamaica can afford would be about six per cent.
He said the improvement was driven mostly by a reduction in imports "and also because I think there was a significant improvement in import substitution".
However, he expressed disappointment in the export performance, which decreased by 23.6 per cent for the first quarter of 2014, according to data provided by the Statistical Institute of Jamaica.
"It continues to fall and I think EPOC is going to shine a little light on that and spend a little time in trying to understand why exports continue to fall even as imports are falling faster," Byles said.
He said another piece of good economic news was that inflation for May was one per cent, bringing the total inflation year-to-date to 2.4 per cent, "better than last year at the same time when we had inflation of 3.6 per cent".
Referring to the US$800 million the Government raised on the international bond market recently, the EPOC co-chairman said that was important for a number of reasons.
First, it will fund all of the debt maturities for the Government for the next 12 months, including a EU150-million bond payment in October this year and another debt of about US$400 million due in June 2015.
Second, it means that the Government's budget for fiscal year 2014-15 is fully funded "so there should be no need to come back to us with supplementary budgets for more taxes or to raise any further debt", Byles said.
"The fact that the international community is once again lending to Jamaica and not just short term ... is significant and says something about their confidence in our policies," the EPOC co-chairman said. The US$800-million debt matures in 11 years.
"We think the country's policies are showing the right results and we are happy about that. The real challenge, however, remains that of growing a little bit faster than we did last year. We appreciate the positive growth last year, but we need a little bit more this year," said Byles.