Wynter predicts growth, 2% inflation in March quarter
Published:Wednesday | February 16, 2011 | 12:00 AM
Bank of Jamaica governor Brian Wynter says prices will likely moderate in the March quarter and is forecasting inflation of one to two per cent, and that the fiscal year outcome will fall within the original target range of 7.5-9.5 per cent.
He also predicts that the real economy will experience growth in the period.
Growth in GDP, said Wynter, will emanate from expansion in mining and quarrying, hotels and restaurants, as well as electricity and water supply.
The March forecast for inflation is largely based on an expected price reversals for agriculture crops, in addition to relatively stable domestic capacity, the central banker said, but he also cautioned that international commodity prices could be a factor in the actual inflation outturn.
The projection comes behind a reported higher than expected inflation outturn for the December quarter at 3.3 per cent - the forecast was two to three per cent inflation - due to prolonged impact of Tropical Storm Nicole, which led to temporary shortages in some agricultural produce.
The upward movements in oil prices, energy cost and trans-portation, and international commodity prices also contributed to the uptick in inflation for the quarter.
The pace of increase was moderated by appreciation in the exchange rate, arising from stability in the forex market, which Wynter said was "reflective of the increasing confidence about the near-term prospects for the economy".
Increased capital inflows
Marginal appreciation of 0.45 per cent was recorded in the weighted average selling rate during the December quarter, comparing favourably, the bank chief said, to depreciation of three per cent for the last five December periods.
"The appreciation in the value of the domestic currency in the quarter was associated with increased net private capital inflows," said Wynter.
For calendar year 2010, the domestic currency appreciated by more than four per cent.
Pointing to fall in average yields on Jamaican sovereign bonds, Wynter also noted that there has been a continued show of confidence by the external community in the country's creditworthiness.
"Average yields on Jamaican sovereign bonds have fallen from about 10.5 per cent at the end of January last year to 7.57 per cent at the end of January this year - about two percentage points in the average spread ... an indication that investors perceive a meaningful reduction in the risks associated with investing in Jamaican securities," said Wynter.