Positive Review By EPOC

Co-Chair of the Economic Programme Oversight Committee (EPOC), Richard Byles, has again given the Government positive reviews in its efforts to stabilise the economy and attain growth under the Economic Reform Programme (ERP).

Mr. Byles, who was addressing EPOC’s monthly press briefing at the Sagicor Life Jamaica head office, in Kingston, on October 7, presented figures for August and September, which showed continuous improvements in the Net International Reserves (NIR) and the cumulative primary surplus.

He noted that although there are no inter-quarter International Monetary Fund (IMF) targets, the economic performance for the period was measured against the budget outlined by the Government.

“When we look at the primary balance, we see that the Government outperformed the budget by $3.4 billion,” he stated.

The primary balance for the period, April to August 2014, was registered at $28 billion, $3.4 billion better than the target of $24.6 billion. Further, at the end of September, the NIR stood at US$2.2 billion, which is US$972 million ahead of the expected September target.

Mr. Byles, however, noted that the NIR surplus will be reduced as the Government pays down the debt, including a €150 million bond, which matures this month. He also pointed out that the country’s debt stock will also see a reduction.

The Statistical Institute of Jamaica (STATIN), advised that the economy grew by 1.8 per cent in the quarter April to June 2014, compared to the similar period last year. This followed growth of 1.6 per cent for the first quarter January to March 2014.

The major growth sectors were agriculture, construction, manufacturing (oil refining in particular), and tourism.

This is the fourth consecutive quarter of growth recorded since the Extended Fund Facility agreement with the IMF in May 2013.

STATIN also announced inflation of 1.1 per cent in August. This followed 1.4 per cent for July and is attributable mainly to the continued impact of drought conditions on food prices.

Mr. Byles noted that once the drought is over, “we should start to experience lower food prices and therefore lower inflation in the October to December quarter.”

As it pertains to revenues and grants for the period, these remained lower than budgeted by $5.9 billion, with shortfalls in tax revenue accounting for almost the entire figure. “The shortfall is a little concerning, but we’ll see what September brings and whether that number is reduced,” Mr. Byles said.

He further informed that the Government made up for the shortfall on revenues by cutting back on expenditure. “Some $10.3 billion of expenditure was not spent, in order to help bridge the shortfall in revenues and deliver the primary balance,” said the EPOC Co-Chair.

In the meantime, Mr. Byles said that the recent reviews by the IMF and rating agency, Standards and Poors (S&P), have given credence to EPOC’s positive outlook for the country’s economy.

“These two reviews give support to EPOC’s opinion that the economy is on the right track of being healed and that we are performing as per the expectations of the IMF agreement. We are (also) strengthened in our opinion that we do have the capacity to execute on the IMF agreement as required,” he said.

The IMF Board approved the fifth review of Jamaica under the Extended Fund Facility (EFF) on September 24, unlocking US$68.8 million of funding.

The review noted that Jamaica’s performance is on track and although it lowered the growth estimate for 2014/15 from 1.4 per cent to 1.1 per cent, as a consequence of the severe drought, it raised its estimate for 2015/16 to two per cent, based on expected agricultural recovery.

Additionally, in September S&P reaffirmed the B- rating for Jamaica, but upgraded the outlook from “stable” to “positive”.

“This is a significant development for the country. They noted the improvement in the NIR, the fiscal management, and the growth that has been achieved over the last four quarters,” Mr. Byles said.

The report also indicated a possible further upgrade in the next six to eight months, if the economy continues to perform positively.

Mr. Byles said this is an important endorsement of the direction of the economy by a key international agency, whose rating is keenly watched by all investors.

By Athaliah Reynolds-Baker