Economy — Page 61

Jamaica: Trade deficit narrows

May 13, 2013 by IC Insider.com

Jamaica enjoyed some encouraging news at the start of the year as the country’s perennial trade deficit narrowed although by a small margin, according to data from Statistical Institute of Jamaica (Statin). Earnings from Non-traditional exports commodities that rose by US28.2 million or 47.5 per cent to US$87.7 million and a cut in the trade deficit with the USA and a reduction in CARICOM imports were the main contributors to this improved position. The deficit was reduced by US$1.2 million to US$401 million for the first month of the year. The improvement came against the back ground of a declined local currency and a sharp narrowing of central government’s fiscal deficit.

The deficit with the United States contracted sharply moving from US$116.4 million to US$78.5 million for the same period.

Jamaica exported 7.7 per cent or US$10.9 million more goods in January this year than was done for the similar month in 2012 resulting in earnings of US$152 million. Imports on the other hand, was a mere US$9.7 million or just 1.8 percent more in January than the same month last year as US$553 million was expended on imported items.

The major commodities to record increases were “Chemicals”, “Food”,“Misc. Manufactured Articles” and Imports of “Chemicals’ which rose sharply by 59.6 per cent or US$36.5 million to US$97.6 million due to higher imports of ethanol products. “Food” increased by US$30.5 million to US$92.2 million or 49.4 per cent and accounted for 16.7 per cent of the import bill. “Misc. Manufactured Articles” accounted for US$34.7 million of imports compared to the US$34.2 million in 2012. “Mineral Fuels, etcetera” which accounts for 32.2 per cent of imports declined by US$71.7 million or 28.7 percent and was valued at US$178.6 million while “Manufactured Goods” declined with a value of US$45.8 million down from US$49.5 million in the similar 2012 period.

Traditional Domestic Exports earned US$58 million in January 2013, a decrease of US$19.4 million or 25.1 per cent when compared to the same period in 2012, due to decreased earnings in two of the three commodity groups, “Mining and Quarrying” and “Manufacture”. “Mining and Quarrying” fell by 0.1 per cent to US$53.5 million in the 2013 review period due to lower earnings from Bauxite. This was valued at US$10.5 million, down from US$11.1 million. “Manufacture declined by 85.0 per cent or US$19.4 million, moving from US$22.8 million in January 2012 to US$3.4 million in the current 2013 review period.

CARICOM Trade | The country imported US$56.1 million from CARICOM, a decline of 16 per cent amounting to US$10.7 million. A reduction in the value of imports in “Mineral Fuels, etcetera” and “Chemicals” contributed to the overall decline in CARICOM imports. “Mineral Fuels, etcetera” decreased by 30 percent or US$14.3 million to US$33.2 million.

Exports to the Region rose by US$0.5 million or 10.5 percent to US$5.1 million during January 2013. STATIN stated that during 2012, Jamaica’s expenditure on merchandise imports grew by 2.4 per cent or US$155.5 million to US$6,594.9 million compared to the previous year. Earnings from total exports rose by US$87.5 million or 5.4 per cent to US$1,709.8 million.”

Filed Under: Economy Tagged With: Economy, GOJ

TT government moves to mop up liquidity

May 7, 2013 by IC Insider.com

The Government of the Republic of Trinidad and Tobago proposes to raise TT$1,000 million through the issue of a 7-year bond with a coupon rate of 2.60% per annum to mop up excess liquidity in the financial market.

The bonds will be issued through the automated auction system operated by the Central Bank. The issuance of this bond will reduce excess liquidity levels in the banking sector in accordance with established monetary policy, while the proceeds of the bond will be held in a frozen account at the Central Bank on behalf of the government. The issue document stated.

A single price auction system will be used and, as far as possible, applicants will be allotted bonds to the fullest extent of their applications. Government Securities Intermediaries are appointed by the Central Bank to act as counterparties in the auction and, thereafter, to provide a secondary market for the bonds. Bids can be placed competitively or non-competitively by submitting the relevant application form, along with payment to a Government Securities Intermediary. The maximum allotment that can be obtained through a non-competitive bid is $100,000 face value at a price established in the competitive side of the auction. This price is the minimum price, when the successful bids are ordered from the highest price to the lowest price and may be at par, premium or a discount.

The government in the offer document that it is also mindful of its role in the development of the local capital market and, in particular, the development of the government bond market. To this end, it continues to provide securities that will cater to the needs of all investors.

The auction will be opened at 10:45 a.m. on Monday May 6, 2013 and will close at 1:00 p.m. on Friday May 17, 2013. Bonds will be dated May 21, 2013.

Filed Under: Economy, Stock Market Tagged With: Daily Trading, Economy, TBills

Observers say FX market is liquid

May 7, 2013 by IC Insider.com

ForEx trading as at Friday 4 May, 2013 | Sale of foreign exchange was greater than the amounts purchased, but the selling rate for the US dollar slipped yet again, in a two-week long appreciation of the beleaguered currency. The closing average rate of the US dollar against the Jamaican dollar is now down to $99.19 compared to yesterday’s $99.26, the currency sold for an average rate of $99.36 on Monday and is well off the low of J$99.81 reached on April 12^th. The Jamaican dollar has appreciated every day this week.

Amounts traded | Authorized dealers purchased more funds today than on Thursday, US$34.14 million vs. $32.8 million, but sales amounted to $38.65 million. Only $26.54 million was sold on Thursday. Based on the trend seen from last week and evident all of this week, the currency may well end up below $99 to US$1 during next week. Where it will end? No one really knows, except may be central bankers? One person within the financial system told ICInsider.com that some corporations and individuals have been squeezed holding the US dollar when Bank of Jamaica launched the index bond which sucked liquidity out of the market for Jamaican dollars.

What is really happening? | ICInsider.com spoke to two persons within the financial sector who are in a position to say what’s going on. One said that corporate clients are no longer demanding FX as they did before since the announcement that the IMF board would be reviewing Jamaica’s application for funding. Individuals who had bought FX earlier are now offloading, fearing further revaluation of the Jamaican dollar. Even financial institutions are off loading into the market. Both respondents said that supply is adequate to meet demand as such persons are not rushing to buy now as they may purchase what they need later at a lower price.

Developments are really worth watching as liquidity returns to the market with far more positive sentiment that before April.

Filed Under: Economy, FX Market, Stock Market Tagged With: Daily Trading, FX Market

T&T: Monthly inflation slows

May 7, 2013 by IC Insider.com

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CENTRAL BANK HOLDS REPO RATE AT 2.75%

Headline Inflation slowed a month-on-month basis for two consecutive months to 0.2 per cent increase in March compared with an increase of 0.3 per cent in February. Food inflation, the main driver of headline inflation, rose to 12.9 per cent in March 2013, up from 10.6 per cent in February. This was mainly attributed to faster price increases for vegetables (24.2 per cent compared with 17.8 per cent in February 2013), fish (5.7 per cent compared with 4.8 per cent in February 2013) and food products not elsewhere classified (40.1 per cent compared with 31.9 per cent in February 2013). Slower price increases were recorded for meat (6.0 per cent compared with 6.9 per cent in February 2013) and oils and fats (0.8 per cent compared with 1.6 per cent in February 2013). In contrast, prices declined for milk, cheese and eggs (-1.5 per cent), fruits (-2.7 per cent) and sugar, jam and confectionery (-3.0 per cent). The lower month over month inflation rate would have given the Central Bank some comfort in keeping the repo rates at the current levels for some time longer even as liquidity increased in the system

The latest data on retail prices released by the Central Statistical Office indicate that there was a slight increase in the rate of inflation for the twelve month period. Headline inflation, measured by the twelve-month increase in the Index of Retail Prices, rose to 6.9 per cent in March 2013 from 5.9 per cent in the previous month.

Core inflation | Core Inflation which excludes the influence of food prices, remained relatively unchanged, inching up to 2.2 per cent in March from 2.1 per cent recorded in February. There was an uptick in the price increase for alcoholic beverages and tobacco (4.1 per cent compared with 2.0 per cent in February) while prices decelerated for health (6.0 per cent compared with 6.1 per cent in February). Growth in private sector credit remained relatively slow in February 2013. On a year-on-year basis, credit granted by the consolidated system to the private sector increased by 2.1 per cent from 1.9 per cent in the previous month. Among the major loan categories, lending for real estate mortgages rose at a robust rate of 13.4 per cent compared with 11.6 per cent in January, while the pace of growth in consumer lending slowed, to 2.9 per cent compared with 3.2 per cent in January 2013. However, business lending declined on a year-on-year basis for the third consecutive month, by 2.1 per cent in February 2013.

Liquidity | Liquidity levels in the financial system, though still high, retreated in the first three weeks of April 2013. Commercial banks’ excess reserve balances held at the Central Bank fell to a daily average of $5,236 million in April 1-23 compared with a daily average of $6,043 million in March. Central Bank intervention in the foreign exchange market via sales of US$60 million to authorised dealers helped to remove $383 million in excess liquidity from the system. Commercial banks remained adequately liquid and therefore did not require funds from the inter-bank market or the repo window. The Central Bank plans to undertake additional measures in the coming months to withdraw excess system liquidity.

Interest rates | Short term interest rates declined further in April 2013. The interest rate on 91-day treasury bills fell to 0.15 per cent in April 2013 from 0.18 per cent in March 2013 and the 182-day treasury bill rate declined to 0.36 per cent in March 2013 from 0.46 per cent in January. With rates in US comparative markets also declining, the differential between TT and US three-month t-bills remained unchanged at 0.10 per cent in April 2013. While economic activity is expected to pick up gradually over the course of 2013, the recovery is likely to be subdued. Continued stability in core inflation suggests that underlying inflationary pressures remain well contained. In these circumstances, the Central Bank views the present accommodative monetary stance as appropriate and has decided to maintain the ‘Repo’ rate at 2.75 per cent. The Bank will continue to keep economic and monetary conditions under close review in the coming months.

Filed Under: Economy Tagged With: Economy, TTSE

IMF Approves US$932.3 Million for Jamaica

May 4, 2013 by IC Insider.com

May 1, 2013 | Press Release No.13/150

The Executive Board of the International Monetary Fund (IMF) today approved a four-year Extended Fund Facility (EFF) arrangement for Jamaica to support the authorities’ comprehensive economic reform agenda. The EFF arrangement amounts to SDR 615.38 million (about US$932.3 million). The financing arrangement forms a critical part of a total funding package of US$2 billion from Jamaica’s multilateral partners including the World Bank and the Inter-American Development Bank, with each having preliminarily agreed to allocate US$510 million over the next four years. The Executive Board approval enables an initial disbursement by the IMF of an amount equivalent to SDR 136.75 million (about US$207.2 million).

Following the Executive Board’s discussion, David Lipton First Deputy Managing Director and Acting Chair of the Board, stated:

“For most of the past three decades, Jamaica has suffered from very low growth, high public debt, and serious social challenges. Key factors behind these problems have been Jamaica’s unsustainable debt burden, low competiveness, a weak business climate, and lack of policy credibility. During 2012/13, the authorities started to tighten fiscal policy and prepared a comprehensive four-year economic reform program to address these challenges.

“The main objective of the program is to put public debt on a firmly downward trajectory and thereby create a virtuous cycle of debt sustainability and higher economic growth. The authorities’ multi-layered reform agenda comprises ambitious fiscal consolidation, improvement in competitiveness, debt reduction, and improved social protection programs.

“Achieving higher and sustained growth is key to increase the welfare of Jamaicans and ensure the country’s long-term macroeconomic stability. The authorities’ growth agenda integrates ambitious fiscal consolidation with structural reforms to reduce impediments to growth and facilitate strategic investments.

“While the full benefits of the reform agenda may take time to materialize, the reforms are urgently needed to ensure a more prosperous future for Jamaica. To enhance sustainability of the reform agenda, fair burden sharing of the reform effort is essential. A central component of the program is the authorities’ package of measures to promote social coherence that includes a floor on social spending, an improved social safety net, and programs to increase employment.

“The authorities recognize that safeguarding the financial sector is also critical. They have established a Financial Sector Support Fund to offer assistance, if needed, to financial institutions participating in the recent debt exchange.

“Although the risks to the program are high, the implementation of the prior actions, the frontloaded nature of the reform agenda, and the envisaged collaboration with development partners should help foster the successful implementation of the program.”

To read full text of the IMF’s press release, click here.

Filed Under: Economy Tagged With: GOJ

Original GoJ Fiscal target almost met

May 1, 2013 by IC Insider.com

Jamaica ended the 2012-13 fiscal year with the lowest deficit in decades as the government reported a deficit of $54.6 billion for the year ending March 2013, just missing the original projection of $53 billion, as revenues came in at $344 billion while recurrent expenditure amounted to $399 billion. Revenues are $17 billion light on the original forecast of $366 billion, while expenditure that was budgeted originally at $414 billion came in $15 billion less. Savings on interest was the main factor for the reduction of expenses, as the item was down $11 billion on the originally budgeted amount.

The main areas of decline for revenues was Corporation Taxes $3 billion, PAYE $5 billion, and taxes on imported items $8 billion. For the current fiscal year government is projecting a deficit of under $10 billion coming from a combination of new taxes and a debt swap that was to have shave $17 billion off the interest bill.

Revenues on target | While revenues were off target for the fiscal year, data out of the Finance Ministry show that with the exception of December when revenues were off by more than $4 billion, the government’s original forecast for inflows were very close to target from November last year. In November, revenues were budgeted to be $29.156 billion but actual inflows came in $600 million less, January was $750 million less when government collected $29 billion, in February revenues fell $600 million short, when the intake was $31.47 billion, and for March $44 billion was pulled in instead of the $44.4 billion planned for. These numbers augur well for inflows into the system for the June quarter this year for government’s intake into their coffers. The data may also be indicating improved economic performance for the country in the first quarter this year compared to last year.