Aug 2006 Financial News

Jamaica's economy registers positive growth

Aug 18, 2006

The Jamaican economy grew by 2.8 per cent for the quarter April to June 2006, compared with the corresponding period in 2005. This growth was catalysed primarily by a 3.4 per cent increase in real gross domestic product (GDP) for the services sector.

On the other hand, the goods-producing sector grew by only 1.1 per cent. Data issued by the Planning Institute of Jamaica (PIOJ) - in its economic review of the quarter highlighted that the only growth areas in this sector were mining and quarrying, which grew by 1.4 per cent and agriculture which grew by a robust 17 per cent in comparison to last year's June quarter.

The growth in agriculture primarily reflects a recovery from the effects of the highly active hurricane season last year compounded with the impact of Hurricane Ivan the year before, that negatively impacted the comparative quarter's performance. Within agriculture, domestic crop production has increased by 24.2 per cent while export crop production has increased by 15.8 per cent.

"Agriculture is our star performer. This performance has been supported by good weather conditions as it has been a very positive year in that regard," said PIOJ's director-general Wesley Hughes at a press briefing yesterday.

"We have seen a recovery, and beyond the recovery we have seen growth in the sector."

The performance of the goods-producing sector was greatly hampered by the fall-off in the construction and installation sector, which contributes nearly 30 per cent of the sector. This sub-sector experienced a 3.5 per cent decline as work on construction sites has slowed down due to cement shortage. The shortage of cement forced the closure of many construction sites after Carib Cement disclosed to the public that it had, by mistake, distributed low quality cement to the market.

The PIOJ estimated that output from the services sector increased by 3.6 per cent in the quarter when compared to the corresponding period the year prior. Within this sector, the main growth area was miscellaneous services, which grew by an estimated 15.2 per cent. The growth in miscellaneous services was primarily influenced by a 19.5 per cent increase in tourism activity, its major component.
According to the chief planning agency, a 20 per cent increase in total arrivals and a 24.1 per cent increase in stopover arrivals boosted tourism.

"Our other star performer was tourism, where real GDP grew by 19.5 per cent," says Hughes.

Other growth areas in the services sector were a 3.5 per cent increase in transport, storage and communications, 2.2 per cent increase in electricity and water, 1.5 per cent in finance and insurance services and a mere 0.9 per cent increase in distributive trade. Distributive trade, a third of the services sector, was also adversely affected by the cement crisis. Retailers and hardware merchants have associated the sluggishness in sales with the fallout in construction and resulting lower disposable income.

The PIOJ projects real GDP growth of 2.7 per cent for this quarter - July to September 2006 - with 2.9 per cent comparative growth in the goods producing sector and 2.3 per cent in the services sector.

"Our view is that the economy will remain positive," says Hughes. "Continued growth in tourism and a return to positive from the construction sector will drive the economy."

Julian Richardson
The Jamaica Observer
Friday, 18th August, 2006.
http://www.jamaicaobserver.com/magazines/Business/html/20060818T000000-0500_111419_OBS_JAMAICA_S_ECONOMY_REGISTERS_POSITIVE_GROWTH.asp