THE CURRENT account of the balance of payments recorded a deficit of US$121.7 million in May 2002, relative to the deficit of US$97.8 million recorded in May 2001 according to latest Bank of Jamaica figures.
The increase in the deficit reflected respective expansions of US$20.2 million and US$15.9 million in the trade and income balances, as well as a reduction of US$7.2 million in net earnings from services. Partly offsetting these changes was an improvement of US$19.4 million in the surplus on the current transfers sub-account. Within the financial account, net private capital inflows were insufficient to finance the current account deficit and net amortisation of Government's external debt. Consequently, there was a draw down of US$89.1 million in the net international reserves for the review month.
Merchandise trade
The widening of the merchandise trade deficit reflected the combined effect of a contraction of US$18.0 million in export earnings and a US$2.2 million expansion in payments for imports (f.o.b). The contraction in export earnings in May 2002 stemmed from reductions of US$10.7 million, US$4.8 million, US$1.5 million and US$1.4 million in the values of major traditional, free zone, non-traditional exports and re-exports, respectively.
The decline in the major traditional category was due to a contraction in the value of alumina exports. This contraction reflected the combined impact of a reduction in international prices and lower volumes in the context of the rains in May 2002, which hampered rail transportation to the ports. Reductions in garment exports continued to account for the decline in non-traditional and free zone exports.
The growth in imports largely reflected increases of US$20.6 million and US$8.9 million in the values (c.i.f.) of capital and consumer goods imports, respectively, partly countered by respective contractions of US$11.6 million and US$11.7 million in raw material and free zone imports.
The expansion in capital goods imports was primarily attributed to increased purchases of equipment for the transport and telecommunication industries, while higher spending on food and durable items, in particular motorcars, was responsible for the increase in consumer goods imports. The decline in the value of raw material imports was largely due to lower spending on oil, in the context of a fall of 5.7 per cent in world oil prices.
Services
The fall in the surplus on the services account for the month stemmed primarily from a decline of US$11.8 million in net travel receipts. Total visitor arrivals in May fell by 6.8 per cent, relative to May 2001, influenced by reductions of 9.3 per cent and 5.5 per cent in cruise and stopover visitor arrivals, respectively.
Income
The increase in the deficit on the income account reflected an expansion in net investment income payments, attributable to higher interest payments on Government of Jamaica external debt.
Current transfers
The improvement in current transfers reflected an expansion of US$20.0 million in net inflows to the private sector for the month.
Capital and financial accounts
A deficit of US$2.1 million was recorded on the capital account for May 2002, US$0.2 million below the deficit recorded in May 2001. In contrast, the financial account registered a surplus of US$123.8 million, compared with a surplus of US$100.1 million in May 2001. Within the financial account, net private investment inflows of US$54.4 million was insufficient to finance net official outflows of US$19.7 million, as well as the deficits on the current and capital accounts. In this context, the net international reserves fell by US$89.1 million for the month.
April to May 2002
For the period April to May 2002, the current account deficit widened by US$92.2 million to US$186.1 million, relative to the deficit recorded for April to May 2001. The increase in the current account deficit reflected expansions of US$65.7 million and US$18.3 million in the trade and income deficits, as well as a reduction of US$38.1 million in net earnings from services. Partly offsetting these changes was an improvement of US$29.9 million in the surplus on the current transfers sub-account. Within the financial account, net private capital inflows were insufficient to finance the current account deficit and net amortisation of Government's external debt. Consequently, there was a draw down of US$131.0 million in the net international reserves for the period.
Merchandise trade
The increase in the merchandise trade deficit stemmed from a contraction of US$48.4 million in export receipts, as well as an increase of US$17.3 million in payments for imports (f.o.b.). With the exception of other traditional exports, all the export categories declined over the review period.
Major traditional exports contracted by US$30.1 million, largely reflecting a fall of US$28.1 million in the value of alumina exports. The contraction in alumina exports was due to reductions in both volumes and price. Continued downturn in the garment industry during the review period was mainly responsible for declines of US$8.0 million and US$8.9 million in non-traditional and free zone exports, respectively.
Imports of capital and consumer goods increased by US$38.3 million and US$18.4 million respectively. These increases were partly offset by respective reductions of US$16.8 million and US$14.2 million in raw material and free zone imports.
The growth in capital goods imports was attributable to increased expenditure on transport and communication equipment, while the expansion in consumer goods imports stemmed from higher spending on food, motorcars and cellular telephones. Within the raw material category, lower fuel imports was recorded for the period in the context of reduced oil prices.
Services
The contraction of US$38.1 million in the surplus on the services account, relative to FY 2000/01, primarily reflected a decline of US$42.6 million in net travel receipts. Total visitor arrivals for the period fell by 11.1 per cent, relative to April to May 2001, influenced by reductions of 13.3 per cent and 7.6 per cent in cruise and stopover visitor arrivals, respectively.
Income
The deficit on the income account widened by US$18.3 million for the review period, attributable to higher interest payments on Government of Jamaica external debt.
Current transfers
For the review period, net receipts from current transfers increased by US$29.9 million, relative to the comparable period of FY 2000/01. Growth of US$30.7 million in net inflows to the private sector more than offset the decline of US$0.8 million in net official transfers.
Capital & financial accounts
A deficit of US$3.9 million was recorded on the capital account for the review period, US$0.8 million below the deficit recorded in the same period in 2001. Within the financial account, net private investment inflows of US$99.7 million were insufficient to finance net official outflows of US$40.7 million, as well as the deficits on the current and capital accounts. Consequently, there was a draw down of US$131.0 million in the net international reserves of the Bank of Jamaica. The level of gross reserves stood at US$1,870.6 million at the end of May 2002, representing approximately 31.3 weeks of imports of goods and 20.8 weeks of imports of goods and services.
