Bank of Jamaica (BoJ) Governor, Brian Wynter, is forecasting marginal growth in economic activity for the March quarter, which should spill over into fiscal year 2011/2012.
The growth, he said, will be driven by continued expansion in mining and quarrying, hotels and restaurants, and electricity and water supply, which should offset declines in other sectors.
Mr. Wynter was addressing the BoJ’s quarterly press briefing for the October to December period held on Wednesday (February 15) at the institution’s Nethersole Place headquarters downtown Kingston, where he reported that real gross domestic product (GDP) for the review quarter contracted within the range of 0.0 per cent to 1.0 per cent, similar to that of the July to September period.
All industries are expected to have contracted, with the exception of mining and quarrying, and hotels and restaurants, due mainly to weak demand, resulting from continued declines in consumption and investments.
The BoJ is also projecting a deceleration in inflation to between 1.0 per cent to 2.0 per cent for the March quarter, largely predicated on expected price reversals for agriculture crops, and continued stable domestic capacity.
The projection comes behind a higher than expected outturn for the December quarter at 3.3 per cent, largely due to the impact of Tropical Storm Nicole, which affected the island in September, and led to temporary shortages in the supply of some agricultural produce and higher prices for these items. Rise in international oil prices, which led to increased costs for energy and transportation, also contributed to the higher than expected outturn.
Given the forecast for March, the BoJ is expecting inflation for financial year 2010/2011 to fall within the range of 7.5 per cent to 9.5 per cent, with a range of 5.5 per cent to 7.5 per cent for the medium-term.
Mr. Wynter noted that while higher than anticipated increases in international commodity prices continues to be the main risk to the inflationary target, greater than anticipated contraction in domestic demand could contain inflation pressures.
As for the long-term, he said the goal is to achieve low and stable inflation in line with that of the country’s major trading partners, which for 2010, was 5.1 per cent. Meanwhile, the BoJ Governor informed that the consensus is that the global economy grew at a faster rate in 2010 than previously expected, led by emerging economies such as China and India. He said that although the prospects for global growth in 2011 have also improved, this is expected to be at a slower rate than 2010 due to monetary tightening being undertaken by some emerging economies.
He said that nonetheless, the forecast for continued growth in the world economy, particularly the United States, bodes well for remittances inflows and tourist arrivals to Jamaica.
He stated that the Jamaican economy has continued to benefit from the ongoing transformation, which commenced in 2010. “Consolidation in the fiscal accounts and the demonstrated commitment to fiscal responsibility have reassured investors about the favourable prospects for stability in the economy,” he pointed out.
This has been reflected in the continued decline in interest rates in the money and bond markets as well as the stable to appreciating trend in the exchange rate, he added.
Mr. Wynter, noted further that the quarterly observance of the targets under the International Monetary Fund (IMF) standby agreement and the associated programme of reform have affirmed perceptions about the progressive improvements in Jamaica’s macroeconomic management.
“These continuing improvements must now form the foundation for a more robust participation by the private sector in the creation of sustainable economic growth and development,” he stated.
