Economy — Page 56

NIR down but so is IMF debt

September 9, 2013 by IC Insider.com

The latest data from the Bank of Jamaica shows a decline in the net international reserves for the country to US$882 million at the end of August, down from US$930 million at the end of July, a decline of US$48 million.

The decline was mainly due to the central bank paying off US$77 million to the IMF thus reducing the amount due to them from US$861 to US$783 million. The gross reserves stands at US$1.687 billion or US$125.5 million less than at the end of July.

The gross NIR now represents 11.22 weeks of estimated Goods & Services Imports.

The country now enters a period that is traditionally characterised by lower inflows and higher demand. However, with the Highway 2000 Ocho Rios leg to resume, the next few months should be seeing capital inflows in connection with this project, which should help augment other inflows to the system.

Related Posts | NIR surpasses $1 billion

Filed Under: Economy, FX Market, Stock Market Tagged With: Economy, GOJ, NIR

Trades deficits narrows to May

September 3, 2013 by IC Insider.com

Jamaica imported goods valued at US$2.69 billion during the January to May 2013 period, while imports for the similar period in 2012 was US$2,735 billion, a decrease of US$42 million. Exports for the January to May 2013 period amounted to US$714.0 million, when compared to the US$720.0 million recorded in the comparable 2012 period a fall of US$6.0 million narrowing the trade deficit by US$36.1 million.

Imports | The value of imports for commodity groups, showed a general downward trend. The primary commodity group imported during the period was “Mineral Fuels, etcetera” which amounted to US$960.8 million and accounted for 35.7 per cent of total imports. Relative to the US$1,143.5 million imported for the January to May 2012 period, the value of “Mineral fuels, etcetera” decreased by US$182.7 million or 16.0 per cent. This decline was as a result of reduction of items such as ‘Coal, Coke and Briquettes’ and Gas, natural and manufactured. “Machinery and Transport Equipment” valued at US$374.6 million, declined marginally from US$378.6 million in the similar 2012 period. “Manufactured Goods” valued at US$230.6 million, fell by US$30.3 Million or 11.6 per cent.

Traditional Domestic Exports | During the five months of 2013, the contribution of major traditional domestic exports to the value of domestic exports decreased from 54.9 per cent in the 2012 review period to 50.9 per cent in the similar period in 2013. Traditional exports amounted to US$347.5 million in the period, down US$35.4 million from US$382.8 million in the 2012 period. The decline is in the “Mining and Quarrying” and “Manufacture” groups.

Non-traditional exports increased during the January to May 2013 period by US$20.7 million or 6.6 per cent to US$335.2 million.

Imports from CARICOM for the first five months of 2013 accounted for 13.5 per cent of total imports and was valued at US$362.3 million representing a decrease of US$91.8 million or 20.2 per cent when compared to the US$454.1 million recorded for the 2012. The value of the Non-fuel imports from CARICOM amounted to US$125.8 million, up from US$115.1 in the comparable 2012 period.

“Mineral Fuels, etcetera” decreased during the 2013 review period, by US$102.6 million or 30.0 per cent and was valued at US$236.5 million. Other notable commodity groups imported from the region included “Food”, valued at US$76 million, “Beverages and Tobacco” US$17.2 million, “Chemicals”, US$11.4 million, and “Manufactured Goods”, US$9.9 million.

The United States of America (USA) remained Jamaica’s main trading partner during the January to May 2013, with US$923.9 million or 34.3 per cent of imports originating from that country. Total exports to the United States amounted to US$368.2 million or 51.6 per cent. Jamaica incurred a trade deficit with the United States of US$555.7 million, down from US$667.3 million in the similar 2012 period.

Total exports to CARICOM for the January to May 2013 period was valued at US$26.7 million, representing a decline of US$2.2 million or 7.8 per cent. Domestic exports to CARICOM decreased to US$22.2 million and accounted for 3.3 per cent of the country’s domestic exports. Re-export for the period increased and was valued at US$4.5 million, in the current review period.

For the first five months of 2013 Jamaica incurred a trade deficit with her CARICOM partners of US$335.6 million when compared to the US$425.2 million recorded for the January to May 2012 period. The trade gap narrowed by US$89.6 million or 21.1 per cent.

Filed Under: Economy Tagged With: Economy, GOJ

Sharp increase in May Remittances

September 3, 2013 by IC Insider.com

For May 2013, net remittances were US$162.0 million, an increase of US$19.6 million or 13.7 per cent relative to the corresponding period of 2012. This resulted from an increase in gross remittance inflows and a contraction in outflows as the foreign exchange market settled after the signing of the agreement with the IMF agreement by the government.

Gross remittance inflows for the month were US$181.5 million, an increase of US$14.9 million or 8.9 per cent relative to the corresponding month of the previous year and the highest monthly inflow for 2013. The inflows are the highest since 2009 when inflows fell to US$142 million and last year’s $166.7 million. The rise in total remittance inflows emanated from increases of US$8.0 million and US$6.9 million in both the Remittance Companies and Other Remittances subcategories, respectively.

Total remittance outflows for the review month decreased by US$4.7 million to US$19.6 million. The combined impact of inflows and outflows resulted in net remittance flows increasing for May 2013.

Historical data show a link with exchange market instability and remittance flows. In 2009, other remittances started to fall from October 2008 when they fell US$10 million to US$28 million; in November it fell further to US$18.3 million; moved up to $27.1 in December while in January it fell to US$25.6 million; US$19 million in February and US$19.4 million in March. The average monthly inflows for the first quarter of 2008 was $40 million. The decline seems to coincide with the sharp fall in the value of the local dollar and scarcity of US dollars in the economy as investors, who received foreign currency, would most likely have held onto them than surrender them into the system. The same situation appears to have occurred since 2012 into the early months of this year.

January to May 2013 | Net remittances for January to May 2013 were US$753.5 million, representing a growth of US$15.6 million or 2.1 per cent relative to 2012. The out-turn for the review period reflected an increase in gross inflows, helped by a reduction in outflows. For the period, total inflows were US$854.2 million, representing a minor increase of US$2.6 million.

Remittance inflows for the year to-date were above the corresponding pre-crisis (2008) out-turn. However, the growth rate in remittance inflows has seen a deceleration since 2010, most likely due to Jamaicans speculating against the local currency as the country went through a prolonged period without an IMF agreement and a declining net international reserves and overvaluation of the Jamaican dollar as a result of years of local inflation exceeding by far that of our major trading partners.

The increase in total remittance inflows reflected a US$13.5 million or 10.8 per cent improvement in inflows through Other Remittances, together with a US$10.9 million or 1.5 per cent reduction in flows from Remittance Companies sub-category. For the review period, the positive growth in net remittances inflows was also due to a contraction of US$13.0 million in outflows.

Related posts | April remittances back on track | Remittance inflows dip

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Filed Under: Economy Tagged With: BOJ, Economy, GOJ, Remittances

Eastern Carib businesses more optimistic

September 2, 2013 by IC Insider.com

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There is often quite some difference between perception and reality. Nowhere is this more prevalent than in the views of business persons about economic matters and forecasting of the immediate economic developments and how it will affect their businesses. Nevertheless the views of the business sector is sought formally by governments and government agencies. Others in the private sector are also interested as such views can shape the action they take. Central bankers are particularly interested as the views of the business sector will help them in planning monetary policy moves.

The Eastern Caribbean Central Bank (ECCB) undertakes a Business Outlook Survey (BOS) twice per year. The latest such survey was conducted in each of its member countries during the second quarter of 2013 and indicates that, in general, economic conditions for businesses for the period January to June 2013 deteriorated compared with the corresponding period of 2012. However, businesses in the Eastern Caribbean Currency Union (ECCU) expect an improvement in economic conditions for the second half of 2013, compared with the corresponding period in 2012.

The businesses surveyed also indicated that the terms and conditions for lending in the ECCU region were not as tight during January to June 2013 compared with the comparative period of 2012.

Looking forward. businesses indicated that the terms and conditions for lending set by the banks will tighten in the second half albeit to a lesser extent than January to June 2013. The results indicate that general business conditions in the ECCU for the period January to June 2013 deteriorated more than had been expected. Businesses are optimistic about an improvement in business conditions during the last six months of 2013. Credit conditions were considered to have tightened but to a lesser extent during the first six months of 2012.

Further easing is expected over the period July to December 2013 albeit to a lesser extent than the period January to June 2013.

During the July to December 2013 period, businesses expect their sales performance and profits to improve relative to the second half of 2012. With respect to overall exports, Antigua and Barbuda, Dominica, Grenada, Montserrat, and St Vincent and the Grenadines are optimistic about their exporting prospect during the outlook period while businesses in Anguilla, St Kitts and Nevis and Saint Lucia expect conditions to remain the same. Respondents throughout the ECCU indicate that they expect the cost of doing business to continue on an upward trajectory.

With respect to construction activity, sentiments in Dominica, Grenada Montserrat, St Kitts and Nevis and St Vincent and the Grenadines are optimistic about the outlook period while businesses in Antigua and Barbuda and Saint Lucia expect activity to remain unchanged for the projection period. Businesses in Anguilla expect construction activity to continue to decline.

First half outlook | At the ECCU level, 37.4 per cent of the businesses surveyed indicated that they anticipate that general economic conditions would improve in the first half of 2013, while 23.6 per cent expect economic conditions to deteriorate. Of the total, 39.0 per cent expect conditions to remain the same. This resulted in an overall NPI of 13.74 for the region, reflecting the overall positive business sentiment for the first half of 2013. Respondents also expressed optimism when they were asked about the economic climate within their sector survey respondents in five of the ECCU member countries are optimistic about their prospects for the first half of 2013, with positive NPIs being recorded for Grenada (60.0), Montserrat (48.0), Antigua and Barbuda (47.62), St Kitts and Nevis (20.0), and St Vincent and the Grenadines (12.50); while businesses in Saint Lucia (-66.67), Dominica (-36.0), and Anguilla (-18.75), were generally pessimistic about their prospects.

ECCU member countries | Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Anguilla and Montserrat

Related posts | Mixed views from Eastern Carib States

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Filed Under: Economy Tagged With: ECCU, Economy

Two banks under ECCB control

September 2, 2013 by IC Insider.com

The eastern Caribbean is not having the best of times. Borrowings and the economic fallout flowing from the global economic crisis of 2008 have severely constrained economic activity in the region plus the member states of the ECCU share a currency that the individual countries have little control over.

In Anguilla, growth has virtually collapsed, falling from an average of 15.8 per cent between 2005 and 2007 to an average contraction of 5.5 per cent for the period 2008-2012, resulting in two local banks facing hard times with their non-performing loans escalating to levels beyond the guidelines set by the Eastern Caribbean Central Bank (ECCB) and in turn resulting in the banks not meeting their capital requirements.

According to a speech by the chief Minister of the island, “In recent times there has been great unease about the operations and performance of the two indigenous banks in Anguilla, the Caribbean Commercial Bank (Anguilla) Limited (CCB) and the National Bank of Anguilla Limited (NBA). This has given the government cause for concern. Part of this concern is due to the fact that they are the two largest financial institutions in the country, together accounting for 76.7 per cent of the total assets of the banking sector.”

The global economic and financial crisis have hit the country’s major sectors, tourism and construction and this has had a significant impact on the performance of loans to these sectors. The banks have been facing a number of challenges including poor earnings performance, declining asset quality, high levels of non-performing loans, weak corporate governance and the inability of their managements to reverse the situation.

The organs of the ECCB, the Monetary Council and the Ministerial Sub-committee on Banking, after due consideration and representations by the Government of Anguilla, which is a member of the Monetary Council and the Ministerial Sub-committee, have decided to invoke Part IIA, Article 5B of the ECCB Agreement Act 1983.

This step has not been taken lightly and extensive discussions have taken place with the Foreign and Commonwealth Office of the British Government and they too have concurred with this action.

The daily operations of the banks will be carried out by the current staff of the respective banks under the supervision and close monitoring of the ECCB with a change only in senior management and the Board. Under the guidance of the ECCB and the other institutions work will be undertaken to restore these banks to a state of normalcy.

The ECCU member governments have agreed that the three critical policy areas at this time are growth, financial stability and fiscal stability. The Chief Minister stated, “However, the efforts to attain financial and fiscal stability will not be successful unless there is some economic growth. We therefore intend to initiate discussions with the British Government on a public sector investment development programme for the long term sustainability of the Anguillan economy.”

He continued, “In terms of the private sector, as Chief Minister and Minister of Finance, I immediately recognised the fundamental weaknesses in Anguilla’s economy especially as it related to two the most important tourism projects, namely the Cap Juluca Resort Project and the Flags Luxury Properties Golf Course Resort Project both of which were mired in legal and financial difficulties and sought to get them stabilised so that they could generate the employment and economic activity expected of such large projects.”

Related posts | Mixed views from Eastern Carib States

Filed Under: Economy Tagged With: ECCU, Economy

July surplus as Govt income jumps

September 1, 2013 by IC Insider.com

The Peter Phillips lead Ministry of Finance delivered the highest revenue intake for the fiscal year to date with nearly $32 billion in intake bettering the original forecasted figure by $1.7 billion and also delivered the first surplus for the fiscal year.

The deficit for the month, projected at $1.7 billion ended at $330 million in surplus. Year to date, the deficit is $6 billion ahead of target at $5.7 billion flowing from $700 million better revenue intake and $5.4 billion less spending. Wages are down $1.3 billion, interest payments $1.5 billion and capital spend $1.7 billion.

For the month, tax on interest is up $830 million over projections, corporate taxes are up $500 million to $1.1 billion, PAYE underperformed by $550 million with inflows of $5 billion the same as in June, tax on dividends exceeded forecast for the first time this year coming in at $331 million versus $259 forecast. Telephone tax which underperformed in June, stepped up in July with a collection of $1 billion versus forecast of $459 million, only $64 million was collected in June against forecast of $474 million.

Overall taxes on production and consumption delivered $10.9 billion just up on the budgeted amount of $19.4 billion in July. Tax on international trade was slightly better that forecast at $11 billion compared to $10.7 billion budgeted with most of the individual items doing better or close to budget.

July’s expenditure | Payment for wages was down to $7.55 billion versus forecast of $8 billion, interest payment was down from $8.2 billion budgeted to $7.7 billion. Other recurrent expenditure payments were lower than forecast at $7.6 billion actually paid against $8 billion forecast.

So far the government is well on the way to wiping out the deficit this fiscal year if they continue on the present track and don’t expand expenditure dramatically later in the year as the fiscal numbers improve.

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Filed Under: Economy Tagged With: Economy, GOJ

IMF predicts 1.5% growth for T&T

August 26, 2013 by IC Insider.com

The staff of the IMF projects real gross domestic product (GDP) growth of some 1.5 percent for the economy of Trinidad and Tobago in 2013, with risks slightly to the downside, should development spending be under-executed.

The economy of Trinidad and Tobago is poised for a modest recovery in 2013 after disappointing growth in 2012 that was due largely to supply constraints, including maintenance operations in the energy sector and an industrial dispute in the non-energy sector. A release from the IMF staff who reviewed the economic data said headline inflation rose to 9.3 percent in 2012, but core inflation, which excludes food prices, remained moderate at 3.1 percent and has since fallen further to 2.2 percent in March 2013. Unemployment is low at about 5 percent, but underemployment remains significant. The external current account surplus fell slightly on increased dividend outflows, but remained high at 10 percent of GDP. Gross official reserves remained strong at US$9.2 billion at end-2012.

The central government realized a deficit of 1.1 percent of GDP in fiscal year 2011/12 (October–September), after near balance the previous year and was more than explained by a decline in energy revenues due to output shortfalls. Gross government debt increased by some 6 percentage points of GDP to a still-manageable 39 percent of GDP. Most of this increase relates to a one-off issuance of bonds relating to a failed insurance company (CLICO), about half of which is expected to be retired in 2013.

Despite accommodative monetary policy, private sector credit growth was modest. The Central Bank of Trinidad and Tobago (CBTT) cut its policy repo rate to 2.75 percent in September 2012. The CBTT continues to mop up considerable excess liquidity via voluntary term deposits by commercial banks and a recent TT$1 billion government bond. Commercial banks remain well capitalized, profitable and liquid and at the end-2012, non-performing loan (NPL) ratio fell to 5.4 percent.

Executive Board Assessment | Executive Directors welcomed the signs of economic recovery fueled by growth of the non-energy sector. They agreed that the authorities’ macroeconomic policies are appropriately supporting the recovery in the near term given downside risks. Over the longer term, the policy priority should be to recast fiscal policy in the context of the country’s non-renewable resource endowment while pursuing structural reforms aimed at diversifying the economic base.

Directors commended the authorities’ adoption of a medium-term fiscal consolidation target. Specific measures should be identified, which would also improve the composition of public spending. This should include the phasing-out over time of poorly-targeted and unsustainable subsidies (notably on fuels) and transfers, while protecting the most vulnerable segments of society and priority social spending. Looking ahead, Directors recommended adoption of a longer-term strategy embodied in a fiscal framework to extend the benefits of current natural resource wealth to future generations. Increasing non-energy revenues and containing current expenditure to raise development spending over time will be important.

Directors underscored the need for structural reforms to facilitate economic diversification and improve competitiveness. In this context, they welcomed the authorities’ commitment to improve the business climate.

Filed Under: Economy Tagged With: Economy, Trinidad & Tobago

IMF team passes Jamaica, BUT

August 22, 2013 by IC Insider.com

The IMF team reviewing Jamaica’s compliance with the agreement tied down earlier this year, gave the authorities glowing marks for their achievements for the first quarter to the end of June, effectively giving their seal of approval but, “These staff level understandings are subject to approval by the IMF’s Management and Executive Board. Provided that performance remains strong, Board consideration of the first review of Jamaica’s IMF-supported program under the Extended Fund Facility could take place late September. Upon approval, SDR 19.97 million (about US$30 million) would be made available to Jamaica.

“Overall policy implementation thus far under the program has been strong and structural reforms are progressing” the IMF team stated. The team went on further to state that all quantitative performance targets and indicative targets for end-June were met, including the floor on social spending. For FY 2013/14, a budget that targets a central government primary surplus of 7.5 percent of GDP has been adopted and is now being implemented. The Government continues to implement its decision to strictly limit the granting of discretionary waivers. Several legislative amendments have been adopted to bolster tax administration, and the resources of the large tax-payers office have been increased. All other structural benchmarks to date have also been met in a timely manner. A conceptual framework for a fiscal rule that will help lock in the gains from fiscal consolidation over the longer term is expected to be ready by the end of this month.

“Key elements of the authorities’ updated program are:

The adoption of fundamental tax reform before the next fiscal year, designed to broaden the tax base, simplify the tax system, reduce tax rates, and reduce economic distortions and support growth. Tax reform is programmed to commence with an Omnibus Incentive Tax Act and a Charities Bill, to be tabled in parliament before end-September.
Steadfast implementation of the government’s strategy to increase growth by improving the business environment and pursuing strategic investments.
Further actions to make the financial sector more resilient, through enhanced supervision and monitoring, and with phased reforms of the securities dealers sector.
Strengthening the social protection framework, with enhanced efforts to move recipients from welfare to work, and the recent increase in PATH benefits.

Filed Under: Economy Tagged With: GOJ, IMF

IMF loan payment for St Kitts

August 22, 2013 by IC Insider.com

The Executive Board of the International Monetary Fund (IMF) completed the fifth and sixth reviews of St. Kitts and Nevis’ economic performance under a program supported by a 36-month Stand-by Arrangement (SBA) in July. The completion of the reviews allows the immediate disbursement of an amount equivalent to SDR 4.266 million (about US$6.45 million), bringing total disbursements under the arrangement to SDR 47.37 million (about US$71.58 million).

According to statement released by the fund, “The St. Kitts and Nevis authorities have continued the successful implementation of their Fund-supported program, in particular making progress toward achieving fiscal objectives and debt restructuring. Following a four-year contraction in economic activity, signs of an economic recovery are emerging. Sustained commitment to prudent macroeconomic policies and reforms will be necessary to address remaining risks and vulnerabilities and to support stronger and inclusive growth.

“The 2013 budget is aligned with the authorities’ dual objectives of redeploying resources towards growth-enhancing outlays and continuing fiscal consolidation through significant budgetary primary surpluses. To boost revenue, while steps are being taken to improve revenue administration, action will also be needed to broaden the tax base, in particular to streamline tax exemptions. Moreover, the fiscal performance of the Nevis Island Administration could usefully be bolstered and would benefit from improved communication between the twin-island federation

“The restructuring of public debt has continued, notably with establishing the legal framework for incremental debt/land swaps. To help buttress banks’ income, it is necessary to proceed with launching the land asset management company, according to best practices, and with land sales. Continued collaboration with the Eastern Caribbean Central Bank will be needed to monitor and address financial sector developments and implement reforms.

“Accelerating the pace of structural reforms is important to secure lasting gains in fiscal sustainability, neutralize pressures on current outlays, and promote stronger and inclusive growth. Priority should be given to pension and civil service reform and to streamline the social safety net. Implementing programs to upgrade education and training skills of job seekers to enhance their employment prospects will also be important.”

Filed Under: Economy Tagged With: IMF, St Kitts & Nevis

T-bill rates mixed at auction

August 22, 2013 by IC Insider.com

Interest on Treasury bills rose again in the latest auction held on 21 August 2013. On offer were two instruments seeking to raise $400,000 each for 91 Days and the other of 185 Days duration. Both instruments were oversubscribed.

The average rates came out at 7.34, down from 7.995 percent for the 91 day at the July auction and is back at the level in June. This is a pretty sharp decline, as $771.75 million chased $400 million on offer. But investors who placed bids as high as 7.75 percent were able to get some of their bids filled. Full allotment took place at 7.74923 percent.

The 185 Days instrument came out at an average rate of 8.1255 percent, slightly up from the 182 days instrument issued in late July at 7.88 percent. Investors, however, got rates ranging from 6.729 to 8.50 percent in full and partial allotment as high as 8.657 98 percent. A total of $400 million were on offer and bids amounting $768 million were tendered.

Related posts | T-bill rates move up again