BY JULIAN RICHARDSON Assistant business co-ordinator email@example.com
JAMAICA'S economy plunged further into recession in the 2012 fourth quarter, contracting by 0.6 per cent year over year, but the country should see some recovery over the January to March 2013 period, said the Planning Institute of Jamaica (PIOJ).
The December quarter performance follows GDP declines of 0.1 per cent, 0.2 per cent and 0.2 per cent over the first three quarters of 2012, a background against which the planning agency is projecting economic contraction of 0.3 per cent for last calendar year.
"The out-turn for [the] October to December 2012 performance largely reflected the impact of a weak global economic environment on the main export industries, continued weak domestic demand conditions — perhaps heavily influenced by weak business confidence, and adverse weather-related conditions," said Everton McFarlane, the acting director general of the PIOJ, speaking at a media briefing yesterday in Kingston.
The goods-producing industry contracted by 2.7 per cent while out-turn for the services industry was estimated to be flat, reflecting real value added declines in four industries which were mitigated mainly by an improvement in the wholesale & retail trade; repair & installation of machinery (WRTRIM) industry and the finance & insurance services industries, reported the PIOJ.
Among the sectors, mining & quarrying recorded the steepest decline over the fourth quarter, down 11 per cent. The PIOJ said that the performance largely reflected reduced demand from North America, one of Jamaica's main export markets, due to the relatively low prices prevailing on the international market in the face of comparatively high cost of production locally.
Prolonged drought and Hurricane Sandy in October negatively impacted the agriculture, forestry & fishing sector. The sector contracted by an estimated 4.5 per cent over the period, representing the first quarterly decline since October to December 2010, when the industry was severely impacted by Tropical Storm Nicole, the PIOJ said.
During the review quarter, traditional export crops fell by 16.1 per cent, and other agricultural crops declined by 5.5 per cent, the agency said, adding that increases were recorded for animal farming, up 4.6 per cent, and post-harvest activities, up 2.7 per cent.
The manufacturing and construction sectors contracted by 0.1 per cent and 1.5 per cent respectively. Sluggishness in the former was evidenced by the downturn in key demand-side indicators. There were sharp declines in credit to the private sector, in real terms, and in the flow of loans and advances from commercial banks. There was also a US$4.7-million decline in the imports of raw materials/intermediate goods for October 2012 to US$292.6 million, the PIOJ said.
Building construction contracted due to a slowing in residential and non-residential construction projects, evidenced by housing starts being down 72.3 per cent, and housing completions down 14.8 per cent, the agency reported, adding that other construction also contracted with lower capital expenditure by the National Works Agency (down 2.7 per cent) to $6.35 billion, and telecommunications down 10.9 per cent to $642 million.
In the WRTRIM sector, real value added grew by 0.4 per cent due to increased expenditure associated with preparation activities for Hurricane Sandy, which was evidenced by higher values of ABM & point-of-sale transactions and higher stock of loans for personal consumption, the agency said, adding that the finance & insurance industry was estimated to have grown by one per cent due largely to increases in net interest income on the stock of loans at deposit-taking institutions and fees and commission.
On the other hand, hotels & restaurants fell by 1.3 per cent due primarily to the impact of Superstorm Sandy and weak economic conditions in Jamaica's main source markets, the USA and Europe; electricity & water was down 2.2 per cent and transport, storage & communication was estimated to be flat.
Meanwhile, the Jamaican economy is expected to record weak growth within the range of zero to one per cent in the 2013 first quarter. According to McFarlane, most industries with the exception of hotels & restaurants and producers of government services are expected to record positive performances, albeit against the background of the subdued performance recorded in the comparative period last year.
"Notably, the drag on growth from the mining sector would be substantially eased during the January to March 2013 quarter, despite the decline in total bauxite production for January 2013," said McFarlane, adding, however, that growth in the domestic economy will be affected by the continued weak performance in the global economy.
What's more, the acting PIOJ director general said that, in light of the weak economic performance during the last four quarters, the Government is comitted to strategies to facilitate sustained real GDP growth over the medium to long term, the foundations of which he said are in the PIOJ's Growth Inducement Strategy. The first-phase reform measures include labour market and fiscal reforms, which are expected to lay the foundation for the second phase initiatives that will consist of specific growth projects in strategically targeted sectors (among them, tourism, global logistics, agriculture, and business process outsourcing).