Economy — Page 39

Jamaica ekes out 0.6% growth in Q2

October 1, 2015 by IC Insider.com

The Mining sector grew the most in Q2

Jamaica’s economy increased by 0.6 percent in the second quarter this year, over the similar quarter of 2014 in real terms an represents an improvement over the performance in the first quarter over that of 2014.
This growth in the June quarter was attributed to improved performance in both the Goods Producing industries and Services industries of 0.8 percent and 0.5 percent respectively, the Statistical Institute of Jamaica (STATIN) said in its report on the economy release at the end of September.
“During the first quarter this year, the Jamaican economy grew by 0.4 percent when compared to the similar quarter of 2014. This growth was due mainly to a 0.6 percent increase in the Services industries” Statin said when they released the first quarter numbers in July. The reports are preliminary as Statin will revise them when more data becomes available.
According to Statin “all industries within the Goods Producing industries recorded higher levels of output: Agriculture, Forestry and Fishing (0.3 percent), Mining and Quarrying (4.1 percent) Manufacturing (0.2 percent) and Construction (0.9 percent).

Agriculture was negatively affected by drought conditions

The performance of the Agriculture, Forestry and Fishing industry was constrained by drought conditions which continued to affect the island. The Mining and Quarrying industry benefited from higher production levels at the alumina plants. Increased output from the Manufacturing industry was due largely to higher production levels from the Food, Beverages and Tobacco group. Growth in the Construction industry was due mainly to increased activities in civil engineering”.
“The Services industries recorded higher levels of output with the exception of the Producers of Government Services industry which declined by 0.2 percent. Increased output was recorded for: Electricity & Water Supply (0.7 percent), Hotels and Restaurants (1.4 percent), Transport, Storage and Communication (1.4 percent), Wholesale and Retail Trade; Repairs; Installation of Machinery and Equipment (0.3 percent), Finance and Insurance Services (0.4 percent), Real Estate, Renting and Business Activities (0.5 percent) and Other Services (0.5 percent).The Hotels & Restaurants industry was positively impacted by higher tourist arrivals from two of the main markets; the United States of America (USA) and Europe. Growth in Electricity & Water Supply was tempered by drought conditions which affected water production during the review period. Compared with the first quarter of 2015, the economy grew by 1.5 percent. This was largely attributed to an increase in the Goods Producing industries (2.8 percent) and the Services industries (1.1 percent)” the report stated.

Filed Under: Breaking News, Economy, Feature Stories

Economy estimated to fall 2% to June.

September 28, 2015 by IC Insider.com

Carib Beer brewed in Trinidad by Ansa McAl Group

The domestic economy is provisionally estimated to have contracted by close to 2 percent in the first half of 2015 in Trinidad and Tobago. Domestic economic outlook has deteriorated the country’s central bank says in a recent release on the economy.
The report went on to state, “continued shortfalls in natural gas production saw the energy sector decline by an estimated 3 ½ percent in the first six months of 2015. The non-energy sector, which has provided support to the overall economy for the past few years lost momentum, declining by around 1 percent in the first half of 2015. This decline was mainly due to a slowdown in construction, distribution and manufacturing. Early indicators point to continued sluggish economic performance in the third quarter of 2015.”
Trinidad and Tobago’s economy is highly dependent on the petro chemical industries and has suffered from a sharp fall in the world market prices of produce from the sector. This decline was mainly due to a slowdown in construction, distribution and manufacturing. Government revenues are highly dependent on inflows from the sector. The expectation is for lower government spending going forward and the possibility of a devaluation of the country’s currency that has undergone an appreciation with the local dollar being stable for several years while inflation climbed sharply, leading to a possible overvalued Trinidad dollar. The country just changed governments and that could bring major shift in economic policies against the back ground of falling export earnings and the possibility that oil prices could fall some more on the world market.

This decline was mainly due to a slowdown in construction, distribution and manufacturing.

With excess liquidity remaining at a comfortable daily average of $3.3 billion over the past three months (July – September 21, 2015), the MPC also decided to maintain an aggressive liquidity management programme so as to strengthen the impact of rising interest rates throughout the financial system. As at mid-September 2015, the median commercial bank prime lending rate had increased to 8 ½ percent from 8 ¼ percent in July 2015.
Domestic inflationary pressures have not materialized as initially expected. On a year-on-year basis to August 2015, headline inflation slowed to 4 percent from just over 5 ½ percent in July 2015. Core inflation was stable at just over 1 ½ percent, while food inflation decelerated to around 8 percent from double-digit territory of 11 ½ percent in July 2015. Although current price pressures seem contained, disruptions to domestic agricultural supply and higher production costs facing select food industries could lead to rising food inflation. Increased consumer spending driven in part by recently concluded public sector wage agreements, as well as robust consumer borrowing, could also push up inflationary pressures.

Filed Under: Economy, Feature Stories

Repo rate hiked

September 28, 2015 by IC Insider.com

Repo rates moved up by 25 basis points to 4 ½ percent in Trinidad & Tobago. At its September 2015 meeting, the Central Bank’s Monetary Policy Committee (MPC) agreed to increase the ‘Repo’ rate for a seventh consecutive time to 4.5 percent.
According to the central bank, the most influential factor behind the MPC’s decision remains the normalization of US monetary policy which could reduce capital flows to many emerging market economies, including Trinidad and Tobago, which is already adjusting to persistently low energy prices. The MPC also judged the domestic monetary policy stance as still very accommodative in the context of a contracting non-energy sector and moderate inflationary pressures.
The central bank last increased repo rates in July by 25 basis points to 4.25 percent, then the bankers stated apart from similar reasons as above that locally, rising inflationary pressures remain a concern for the MPC. Headline inflation held steady at just over 5 ½ percent in June 2015, while core inflation slowed marginally to just below 2 percent. However, the MPC expects inflationary pressures to pick up in the remaining months of 2015 due to a number of factors.
The central bankers stated that domestic inflationary pressures have not materialized as initially expected. On a year-on-year basis to August 2015, headline inflation slowed to 4 percent from just over 5 ½ percent in July 2015. Core inflation was stable at just over 1 ½ percent, while food inflation decelerated to around 8 percent from double-digit territory of 11 ½ percent in July 2015. Although current price pressures seem contained, disruptions to domestic agricultural supply and higher production costs facing select food industries could lead to rising food inflation. Increased consumer spending driven in part by recently concluded public sector wage agreements, as well as robust consumer borrowing, could also push up inflationary pressures.

Filed Under: Economy Tagged With: Repo Rates, T&T repo rate

Food prices push inflation in August

September 22, 2015 by IC Insider.com

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‘Vegetables and Starchy Foods’ had the strongest impact on the division moving up by 8.5%

Sharp price movement in the prices for Vegetables and Starchy Foods’ had a major impact on inflation in August with an increase of 0.8 percent resulting in Inflation climbing 3.5 percent since August last year to August this year and by 2.2 percent, for 2015 to August, the Statistical Institute of Jamaica (STATIN) reported.
‘Food and Non-Alcoholic Beverages’ recorded the highest movement for the month of 2.1 percent. ‘Vegetables and Starchy Foods’ had the strongest impact on the division moving up by 8.5 percent as drought conditions persisted in the growing areas. The upward overall movement was, however, tempered by declines of 2.3 percent and 0.5 percent in the divisions ‘Housing, Water, Electricity, Gas and Other Fuels’ and ‘Transport’ due to lower petrol prices and reduction in air fares.
Other divisions that recorded increases are: ‘Alcoholic Beverages and Tobacco’ 0.2 percent, ‘Clothing and Footwear’ 0.3 percent, ‘Furnishings, Household Equipment and Routine Household Maintenance’ 0.2 percent, ‘Health’ 0.1 percent, ‘Recreation and Culture’ 0.4 percent, ‘Miscellaneous Goods and Services’ 1.3 percent, while ‘Restaurants and Accommodation Services’ recorded a 0.2 percent increase. ‘Education’ and ‘Communication’ remained unchanged.

Filed Under: Breaking News, Economy Tagged With: Inflation, Statistical Institute of Jamaica

21% fall in Treasury bill rates in a year

September 17, 2015 by IC Insider.com

Treasury bill rates are continue to decline with the latest ones falling ones continuing the trend once more. Rates are down 20.6 percent on the 182 days Treasury bill notes since September last year or 165 basis points.
Rates on the latest issues of Treasury bill that were on offer on Wednesday September 16th, continued a slow decent since the start of 2015 but a much steeper decline form March last year. The two offerings for $400m each attracted bids for $721.8 million for the 91 days instrument and $786 million for the 182 days instrument, down from over $940 million each in August.
The 91 days instrument cleared at an average of 6.2 percent down from 6.352 percent at the August auction, with bids between 5.99 percent, to 6.3 percent being fully accepted. The 182 days yielded an average 6.35 percent down from August’s average of 6.49 percent. Bids between 6.2 to 6.4 percent, were fully allotted. Earlier, at the September 9th auction, the 28 days Treasury bill average rate came out at 6.228 percent after $707 million chased $400 million on offer.
The declines for the September issues come against the back ground of Bank of Jamaica cutting by 0.25 percent, its 30 days CD rates in August to 5.25 percent.

Filed Under: Breaking News, Economy Tagged With: 182 days Treasury bill, 91 Days Treasury Bills

IMF – J$ may still be overvalued

September 13, 2015 by IC Insider.com

The International Monetary Fund (IMF) is saying that the Jamaican dollar could be overvalued by as much as 19 percent to a moderate rate of 2.1 percent depending on the methods used. The fund also suggest that other methods show an undervaluation of up to 13 percent as well, based on the fall in the price of oil on the world market.
“Preliminary analysis based on the Fund’s EBA-lite and CGER models does not offer clear evidence ofeither over- or undervaluation, after two years of exchange rate adjustment and an important current account adjustment. Safeguarding the gains in competitiveness will be critical in an uncertain global environment. The increased flexibility in exchange rate has been instrumental in improving competitiveness and strengthening the external position. Continued exchange rate depreciation remains necessary given the ongoing inflation differential with trading partners, the risks to competitiveness from a possible upswing in oil prices, and the recent strengthening of the US dollar”, the IMF reported.
The IMF stated, “the macroeconomic balance (MB) and the external sustainability (ES) approaches suggest that the Real effective exchange rate (REER) is undervalued (at 11.5 and 12.6 percent) while, the equilibrium real exchange rate (ERER) and the purchasing power parity (PPP) approaches point to some remaining overvaluation (of 19.4 per cent and 14.4 percent respectively). A key assumption for the MB and ES estimates is that oil prices will recover only gradually and partially from their recent decline, thereby supporting the projected improvement in the current account balance. The confidence intervals are very large for all the estimates and, statistically, zero misalignment cannot be rejected. The results of the EBA-lite methodology, which estimates the gap between the current account balance and its norm for 2015, suggest a slight overvaluation” of 2.1 percent. These overvaluation amounts would require adjustments for inflation differential between Jamaica and our main trading partners, which could mean roughly a 5 percent adjustment to the rate of exchange.

Filed Under: Breaking News, Economy, Feature Stories Tagged With: IMF, The International Monetary Fund

Cut the civil service – IMF message

September 13, 2015 by IC Insider.com

Debt servicing cost, wages and related expenses are two big items that have prevented the Jamaican government from performing the role of government the way they ought as money expended on the excess staffing and by and large part of the debt servicing are non-productive expenditure that divert funds from areas of need. It is therefore not surprising that the International Monetary Fund (IMF) has placed a great deal of focus on these two areas in getting the government to reform the system and move the country intro economic equilibrium. The Fund is of the view that in spite of the move to contain the wage bill by constraints and attrition, more is needed to be done to restore balance in this area.
“Public sector reform is a key pillar of the fiscal consolidation effort over the medium term. The authorities aim to reduce the wage bill from a projected 9.9 percent of GDP in fiscal year 2015/16 to 9 percent of GDP in fiscal year 2016/17. To date, much of this lower spending has been driven by nominal wage freezes, and authorities aim to secure continued moderate wage increases in the context of the ongoing wage negotiations, mindful of the trade off with other spending priorities. There is, however, a need to refocus attention on modernizing the public sector and transitioning toward a smaller and more effective civil service”, the IMF review report says.
The target is steep a cut from 9.9 to 9 percent is a 10 percent change. The wage settlement for 2015 is 4 percent and if all of that was paid in the current fiscal year it would require nominal gross domestic product to rise around 5 to 6 percent. With inflation looking very subdued and real growth not looking robust, the target is likely be a big challenge. The other issue is that even if the government were to achieve the target is, will maintaining it be sustainable long term? The government can cut the number of workers and the wage bill by divesting some services rather than lay workers off.

Filed Under: Breaking News, Economy, Feature Stories Tagged With: IMF, International Monetary Fund, Public sector reform

IMF wants more in NIR

September 12, 2015 by IC Insider.com

The central bank should also continue purchasing international reserves to provide insurance against external risks , particularly since reserves fall short of the Fund’s metric for reserve adequacy, the International Monetary Funds (IMF) states in the March assessment on Jamaica performance under the fund agreement.
The external risks are related to PetroCaribe inflows and the imminent U.S. monetary tightening, the IMF said.
“There was broad agreement on the need to replace, over time, borrowed reserves with owned reserves. The results from applying the IMF metric for Assessing Reserve Adequacy show that Jamaica’s level of international reserves, at 80.4 percent of benchmark in 2015, is still significantly below the suggested adequacy range of between 100 and 150 percent, pointing to the need for continued exchange rate flexibility”, the IMF report on Jamaica stated.
bringing the amount to 100 percent of the desired level would mean bring the amount close to US$3 billion and 150 percent would take it within the US$4 billion mark.

Filed Under: Breaking News, Economy, Feature Stories

Remittance inflows flat in May

September 7, 2015 by IC Insider.com

Total remittance inflows for Jamaica for May this year was just barely up over May 2014, increasing by less than a million dollars to end the month at US$190 million over the corresponding month last year.
Net remittance flows did better, with US$175 million realized, an increase of US$4 million or 2 percent over the corresponding period of 2014. For the first five months of 2015, total remittance inflows amounted to US$905 million, an increase of US$18 million or 2 percent over the similar 2014 period. Net remittances for the first 5 months of the year were US$812 million, an increase of US$16 million or 2 percent over the 2014 period, Bank of Jamaica reported.

Filed Under: Breaking News, Economy Tagged With: Jamaica's remittances, Total remittances

US$316M import drop exports down $81m

September 7, 2015 by IC Insider.com

Import of buses for JUTC added to the Jamaica’s imports to May.

Jamaica imported 13.2 percent or US$316 million less for the year to May this year, than for the 2014 period but suffered a US$81 million fall in exports for the same period. The savings in imports amounts to $758 million in annualized savings.
The shifts in exports and imports resulted in the merchandise trade deficit falling sharply by 13.4 percent to US$1.52 billion. The deficit was US$1.76 billion in the similar 2014 period. Imports for the current 2015 period amounts to US$2.09 billion, while earnings from exports amounted to US$565 million, a fall of 12.5 percent from the previous 2014 period.
Imports for the year to May were down sharply for many of the category of goods imported. Imports of Raw Materials and Intermediate Goods amounted to US$1.124 billion, a decline of US$354 million, down 24 percent. Consumer Goods rose by 5.9 percent or US$38 million to US$684 million, Imports of Food and Beverages fell by 1 percent to US$275 million. Capital Goods excluding Motor Cars accounted for US$216 million of imports, up from US$214 million in the comparable 2014 period. ‘Other Industrial Transport Equipment’ increased by 2.4

Mining sector exports rose a bit

percent or US$7.7 million due to higher imports of buses for the transport sector and ‘Machinery and Equipment’ decreased to a value of US$113 million. Passenger Motor Cars fell by US$2.4 million or 3.5 percent to US$64 million.
Major Traditional Domestic Exports were flat at US$350 million, compared to the same period in 2014. “Mining and Quarrying” grew by 4.7 percent or US$12.9 million to US$288 million during January to May 2015. ‘Bauxite’ rose by US$5.3 million or 10 percent to US$58.3 million. Agriculture earned US$9 million, compared to US$10 million earned in the January to May 2014 period.
Non-Traditional Domestic Exports earned US$193 million, 27.7 percent or US$74 million less than the similar period in 2014. All the sub-groups registered declines.