The central bank in its quarterly report is projecting domestic inflation, as measured by the change in the consumer price index (CPI), forecast in the range of 2.0 per cent to 3.0 per cent for the June 2013 quarter. The average inflation for the June quarters of the last five years was 2.7 per cent. The projection primarily reflects an increase in domestic agriculture prices due to the impact of drought conditions on supplies. In addition, price stimuli are expected from the tax measures implemented in April 2013 as well as some pass-through from the recent movement of the exchange rate. Inflationary pressures from domestic capacity conditions are not envisaged given the persistence of a negative output gap signifying continued weakness in domestic demand conditions.

Imported Inflation is expected to be driven by the recent movement in the exchange rate as the prices of international commodities are projected to decline. In particular, the exchange rate recorded an accelerated pace of depreciation since the September 2012 quarter reflecting increased uncertainty about the macroeconomic programme. The impact of this adjustment is anticipated to be reflected in higher domestic costs for raw materials and consumer goods.

Real GDP growth in the Jamaican economy is projected to be flat within the range of -0.5 per cent to 0.5 per cent for the June 2013 quarter. This follows five consecutive quarters of decline. This performance should reflect expansions in Mining & Quarrying and Construction offset by contractions in Hotels & Restaurants and Agriculture, Forestry & Fishing.

Mining & Quarrying should reflect an increase in the production of alumina following the resolution of mechanical problems at one of the plants during the June 2013 quarter. The expected increase in Construction is predicated on the commencement of work on the Linstead to Moneague leg of the Highway 2000 project as well as the Kingston & St Andrew Water Improvement Project and the Jamaica Development Infrastructure Programme. Other road improvement works are also expected across the island. The projected decline in Hotels & Restaurants primarily reflects the falloff in airlifts and the shifting of the Easter holiday. The central bank is however, forecasting growth for the fiscal year to March 2014.

Jamaica’s real GDP growth is projected within the range of 0.5 per cent to 1.5 per cent for FY2013/14. This projection is predicated on expansions in mining, implementation of planned infrastructure projects as well as improvements in confidence consequent on an agreement with the IMF. Following the arrangement with the IMF, a boost in foreign direct investment is anticipated to propel growth in the second half of FY2013/14. These factors should outweigh the contractionary effects of fiscal consolidation, the central bank stated.

The country’s central bank is estimating that Jamaica’s economy contracted in the first quarter of this year making 5 straight quarters of decline.

The governor of the central bank Brian Wynter in addressing the Bank of Jamaica’s quarterly briefing indicated that the estimated decline in the economy to be within the range of -1.2 per cent and -0.2 per cent. The estimated decline is reflected in both the tradable and non-tradable sectors. The outturn for the quarter was influenced by severe drought conditions as well as weak domestic and external demand, the governor stated. Domestic demand continued to be adversely affected by declining incomes and was exacerbated by uncertainty surrounding negotiations with the IMF. In addition, high unemployment and lower remittance inflows continued to constrain domestic demand.

For the review quarter, Agriculture, Forestry & Fishing is estimated to have contracted, in contrast to growth of 6.5 per cent in the March 2012 quarter. Preliminary data indicated that domestic and export crop production contracted by 10.0 per cent and 2.0 per cent, relative to the respective expansions of 7.8 per cent and 7.4 per cent in the March 2012 quarter. The estimated decline in export agriculture reflected contractions of 1.9 per cent, 18.0 per cent and 90.2 per cent in sugar cane milled, citrus and cocoa, respectively.

Mining & Quarrying is estimated to have contracted for the fifth consecutive quarter, albeit at a slower pace in the review quarter. The decline is inferred from lower capacity utilization in the alumina industry stemming from power generation and machinery problems at one plant. Higher utilization was, however, recorded in the crude bauxite industry arising from normalization over depressed levels in the corresponding period of last year. Capacity utilization fell to 39.2 per cent in the alumina industry relative to 41.7 per cent in the March 2012 quarter while utilization in the crude bauxite industry increased to 92.9 per cent relative to 88.4 per cent in the corresponding quarter of 2012

Hotels & Restaurants is estimated to have declined in the March 2013 quarter, reflecting primarily a contraction in Hotels. The performance of Hotels reflected a decline of 3.2 per cent in total stopover visitor arrivals. Visitor expenditure declined by 3.8 per cent relative to growth of 2.7 per cent in the corresponding period in 2012.

Electricity & Water Supply is accessed to have also contracted in the March 2013 quarter following growth of 0.2 per cent in the corresponding quarter of 2012. The performance of the industry reflected the impact of decreases of 1.2 per cent and 1.1 per cent in electricity generation and water production, respectively. The fall in electricity generation was influenced mainly by lower residential consumption of 5.0 per cent attributed to conservation as well as a marginal contraction of 1.9 per cent in industrial electricity sales.