By Al Edwards, Business Co-ordinatorWITH BOTH tourism and bauxite/alumina creating some buoyancy in the economy, further growth is expected to continue into the new year.
Pointers to such optimism, are the relative stability in the financial sector, and the growing confidence in the local economy and the recovery of the mighty US economy which should spur a 'trickle down' effect assisting the demand for Jamaican goods and services.
Only last month the Planning Institute of Jamaica (PIOJ) in its quarterly review of the Jamaican economy, declared that the overall real Gross Domestic Product (GDP) of the country grew in the third quarter (July to September) by an estimated 1.2 per cent when compared to figures released for the corresponding period last year. The anticipated positive performance is expected to come from both the goods and services sectors with the main areas being agriculture, construction, basic services and financial services.
GROWTH ESTIMATES
This year, growth estimates were driven by the services sector which grew by 2 per cent minus the decline of 0.9 per cent in the goods-producing sector. For the first nine-months of the year, real GDP growth stood at 2.1 per cent with this fuelled by the service sector, which grew from January to September 2003 by 2.8 per cent. Commenting on these numbers the Director General of the PIOJ, Dr. Wesley Hughes said: "We can't do a song and dance about 2 per cent growth rates but it is better than 0 per cent or a decline."
An upswing from the 10.0 per cent decline in the agriculture sector is projected for the new year. Rehabilitative efforts as well as the relatively good weather being currently experienced will facilitate this process.
The rebound of this sector follows improvements made this year. Figures released by the PIOJ last month reveal that the first three quarters of 2003 performed better than the corresponding quarters of 2002. For the period January to September 2003, agriculture grew by 4 per cent and for the third quarter it grew by 5.6 per cent. This was supported by domestic crop production increasing by 25.2 per cent. The sector is expected to benefit from "a buy Jamaican, eat Jamaican campaign" initiated by the "Jamaica Agricultural Society" (JAS).
Although the agricultural sector is showing signs of recovery it still has some way to go. Agricultural exports including sugar declined by 16 per cent from US$265 million in 1995 to US$220 million in 2001. Nevertheless the signs are good that this sector can return to some semblance of pre-eminence.
The construction sector is set to benefit from the commencement of the Inner-city Housing Project and the continued expansion of Highway 2000. Growth is expected to persist in basic services as a result of increased capacity in the electricity sub sector, as well as the expanding communications sector. Increases in loans and advances, as well as the competitiveness between commercial and merchant banks, have fostered the advancement of the financial services sector. With the rehabilitation of this sector practically complete, 2004 should see further gains made by financial services.
TOURISM
Tourism has made a remarkable recovery from the events of 2001 and this winter season looks encouraging. According to Jamaica Tourist Board (JTB) figures, up to October 31,2003 just under 2 million tourists visited Jamaica with cruise ship arrivals also showing a significant increase on last year's figures.
This point has not been lost on Tourism Czar, Dennis Morrison, who notes the encouraging performances of both the tourism and bauxite sectors.
He points to an increase by 5.9 per cent in alumina production for 2003 which has been due to an operating rate of over 99 per cent capacity. Also Jamalco will be expanding its Halse Hall alumina plant by 25 per cent with this capacity coming on stream in 2004. He has declared that overall alumina output should increase by 250,000 tonnes from the expanded Halse Hall plant alone or by 6 per cent in 2004. He sees ALPART also weighing in with a significant contribution, with a further 100,000 tonne expansion set to be completed by the end of June 2004.
"Together these expansions will boost alumina output by over 8 per cent providing additional gross foreign exchange earnings of over US$70 million assuming a conservative price of US$200 per tonne," wrote Mr. Morrison recently. The chairman of the Jamaica Tourist Board (JTB) has presided over a good year for what is still the number one earner of foreign exchange with tourism set to have its best year as far as stop overs are concerned. For 2003 arrivals are estimated at 1.36 million (7 per cent above 2002 and 3 per cent above 2000). Cruise ship arrivals are placed at approximately 1.1 million (27.5 per cent above 2002's figure).
Continuing with the good news he drew attention to the fact that gross foreign exchange earnings are improving and should record a figure of US$1.35 billion for this year.
"For 2004 we are projecting nearly 1.5 million stopover arrivals and 1.3 million cruise ship passengers which would push us near a total of 3 million visitors". Though optimistic, Mr. Morisson sounded a warning to the business community in particular.
"Continued improvements in the bauxite and tourism industries will contribute greatly to narrowing the deficit in the current account of our balance of payments. But not even these can correct the unsustainable movement in our fuel bill and action must be taken if the value of our currency is to be protected . This message is still not understood by our people including the business community."
Inflation for the December quarter is expected to be reflected in hikes in transportation, utility and international commodity costs. As such, headline inflation is expected to be between 1.5 per cent and 2.5 per cent for the December quarter, and 13 per cent for the calendar year 2003, thus overshooting the Ministry of Finance's target for this year. This has been brought on largely by the rise in the exchange rate and efforts to exceed the Government's J$15 billion tax bill.
CHALLENGES FOR 2004
The major challenges facing the Government for 2004 are lowering interest rates, arresting the ever burgeoning debt stock, containing inflation, and maintaining orderly conditions in the foreign exchange market. It has set itself the task of balancing the 2005/2006 budget and is still off the pace. A number of senior bankers have stressed that it must also reduce its need for domestic financing.
Reviewing the year and looking to 2004 the Prime Minister PJ Patterson said in Montego Bay earlier this month: "It is no secret that we have had to pass through a tight fiscal year and are weathering the storm. We have been servicing all our debts and we have made sure that there is no reneging or any unilateral rescheduling of debts. Tourism is the catalyst that will cause economic growth to move faster in Jamaica at this time."
At the present time we are seeing the private sector and the trade unions coming together to see what contribution they can make to the process of national development and we want to applaud them very warmly."
