Ashford W. Meikle, Staff Reporter
Derick Latibeaudiere, Governor of the Bank of Jamaica - RUDOLPH BROWN/CHIEF PHOTOGRAPHER
THE BANK of Jamaica (BoJ), is predicting a healthy growth in the economy for the 2005/06 fiscal year, according to the governor, the Honourable Derick Latibeaudiere.
"The bank expects that the generally favourable macroeconomic conditions that prevailed in the fiscal year 2004/2005 will continue into fiscal year 2005/06," said the governor.
He was speaking at the press conference which reviewed the bank's quarterly monetary policy report (QMPR) held yesterday at BoJ's offices in downtown Kingston.
Outlining the performance of the first quarter, Mr. Latibeaudiere said: "I am pleased to report that the macroeconomic conditions remained generally favourable during the quarter. The financial markets continued to be stable and there was moderation in the inflationary pressures. Government's operations for the fiscal years also contributed to continuing stability, deviating only marginally from the fiscal targets. This, in spite of the disruption caused by the hurricanes during the year."
Inflation for the March quarter was 1.4 per cent and for the 2004/2005 fiscal year, it stood at 13.2 per cent. The governor rued that, "inflation for the period was somewhat higher than the bank's expectation."
Turning to the June quarter, Mr. Latibeaudiere said "We are forecasting an acceleration in economic growth in the June quarter and for the rest of the fiscal year. We expect that growth will be largely influenced by expansions in bauxite/alumina, tourism, construction, communications and distribution. Growth should also be enhanced by the positive spin-offs expected from continued global expansion
and sustained stability in the domestic financial markets."
The central bank is predicting a three to four per cent growth in the GDP for the 2005/2006 fiscal year.
While the governor stressed that it is the Planning Institute of Jamaica (PIOJ) which is responsible for releasing the official data on the economy's performance, Mr. Latibeaudiere posited his arguments on the macroeconomic trends (for example, in the financial services industry) which are monitored by the BoJ.
It is expected that the PIOJ will release the official figures of the country's quarterly economic performance next week.
NO CAP
The governor also used the press conference to defend the BoJ's policy of augmenting the net international reserves (NIR), emphasising that the central bank has no cap on the NIR level.
Speaking candidly, the governor remarked: "You would be surprised at the tremendous confidence that [one has] when you are armed with the reserves. And if you want to know the truth, if you don't have money, the respect that people have for you is less."
He explained, "The bank's reserves policy is motivated by the necessity to ensure a stable and orderly system of international payments over the medium term. There is also a need to protect the economy from domestic and international shocks."
He continued: "The openness of our economy and its vulnerability to these shocks requires that notions of reserve adequacy move beyond coverage of a mere 12 weeks of imports of goods and services. The purpose of the accumulation of the reserves is therefore to ensure that we make the best financial preparation to meet unforeseen challenges."
He concluded, "I don't want us to return to the periods of time when we could not pay our bills our export bills. No one is going to lend money to people who don't have money."
The governor also announced Jamaica's participation in the Financial Sector Assessment Programme (FSAP) to be conducted by the International Monetary Fund and the World Bank. He noted that the FSAP "will assess the soundness of the financial system and its vulnerability to shock as well as the observance and implementation of the relevant international financial sector standards and codes."
As it relates to the current debate between the Jamaica Bankers' Association and the Jamaica Manufacturers' Association/Jamaica Agricultural Society on interest rate spreads, the governor said the central bank would not join the fray, implying the moral dilemma.
"We will not publicly comment. The BoJ is the supervisor of banks. My mandate is to say to commercial banks to run a sound bank and preserve depositors' money."
