By Andrew Green, Staff Reporter 
Davies and Latibeaudiere
THE ECONOMY is stable and making steady progress, says Minister of Finance and Planning, Dr. Omar Davies. At present, the country is on course to meet this year's target of keeping inflation within nine per cent, growth at or above 2.5 per cent, and the budget deficit within four per cent of the value of the national output, Dr. Davies said. He was speaking at a press conference at his Ministry's Heroes Circle offices in Kingston on Friday.
"The results for the first two months and projections for the first quarter are ahead of what we expected in terms of the overall deficit," he said. After missing its 2.7 per cent growth and seven per cent inflation targets in the last financial year ended March 31, the country barely achieved its key target of keeping the budget deficit within six per cent of the Gross Domestic Product. That target was missed by a wide margin the year before, creating severe damage to its credibility in local and international markets.
"Last year demonstrated the possibility of us recovering from what would have been an initially disappointing start," Dr. Davies said. The early course of the economy last year suggested that it would not have met its deficit target, with even the Finance Minister expressing this publicly.
INTEREST RATES
The situation is reversed this year. Tax revenue for April and May has been estimated at $22.1 billion, or 1.5 per cent above the budgeted figure. Spending, on the other hand, is estimated at $32.4 billion, or 4.6 per cent less than budgeted. Dr. Davies said, "We have benefited from certain positives including the faster than projected reduction in interest rates. We are on target we expect to do slightly better than projected."
For this year, the price of petroleum, "is a concern," said Bank of Jamaica Governor Derick Latibeaudiere. The original forecast for the current fiscal year assumed an average oil price of US$30 per barrel, but the price hit a two decade high of US$42.33 per barrel on June 1, before easing back somewhat.
POSITIVE DEVELOPMENT
"In terms of the oil prices, obviously this is outside of our control," Dr. Davies said. "This is one of the shocks which could do damage to our projected path."
There has been some fear in the investment community that the oil price could have negative implications for inflation and possibly undermine the critical two-year Memorandum of Understanding (MoU) signed with trade unions representing employees in the public service.
"The MoU is not threatened by the movements in oil prices," Dr. Davies said. "The discussions between the Government and the trade union leadership focused greatly on that question."
There have been some positive developments in the world petroleum market recently, Mr. Latibeaudiere said. "We haven't factored in the most recent positive development. But even with the average price at the most recent revision, we are still below 10 per cent in terms of inflation."
"In terms of the real economy, the news continues to be good," Dr. Davies said. "We are beginning to see the full benefits of the expansion of Alcoa which came on stream towards the end of last year both in terms of output and prices."
Tourism figures also reflect a record year, the minister said.
"There are other areas of the economy which are doing well," he said. One is the much criticised sugar industry, which is expected to produce 130,000 tonnes this year, substantially ahead of the crop the year before.
And to secure foreign credit to help support the budget, Dr. Davies said he would start an extensive tour of the financial capitals of Europe on Tuesday. "The primary objective is to keep in touch with our creditors and expand the number of persons who would like to join the group of creditors."
