The Jamaican economy is projected to grow by one per cent this calendar year, but new projections by the Planning Institute of Jamaica (PIOJ) also suggests that it is just as likely to shrink by 0.5 per cent.

The new forecast comes in a period of uncertainty linked directly to downturns in the financial markets in Jamaica as well as globally.

But yesterday, PIOJ director general Dr Wesley Hughes told Wednesday Business that while the credit crunch was a contributing factor, he would not go so far as to say it was the overriding cause for the PIOJ's more pessimistic outlook.

"There is a general slowdown, but the credit crisis is only a contributory factor," he said.

The new projections issued by the PIOJ Monday are coming off a flat third quarter, July to September, beset by inflationary pressures and a falling currency; as well as real economic decline of 0.3 per cent within the calendar year to September.

Lowest quarterly rate

Dr Wesley Hughes, director general of the PIOJ said Monday that inflation from July to September was 4.7 per cent.

"This is the lowest quarterly rate since July to September 2007," he said at his quarterly press briefing on the economy.

The planning agency is also reporting that provisional data for October shows that arrivals through airports was down one per cent.

But, more positively, the agency said cruise ship arrivals were up 15 per cent, while total bauxite production also rose 4.7 per cent on the back of a 14 per cent rise in alumina output that offset the four per cent dip in crude bauxite production.

In the third quarter, total bauxite production also grew by 2.5 per cent.

Tourism slipped, however, pushing the hotel/restaurants GDP to -0.1 per cent within the quarter, while the broader 'transport, communications and storage' sector in which it falls declined by 3.2 per cent.

Contributing to those losses were the pullout of major shipping lines from Jamaica, the PIOJ said, as well as a decline in maritime cargo and airlifts.

Total visitor arrivals declined overall by six per cent: stopovers were 0.4 per cent, while cruise arrivals declined 17 per cent.

Agriculture GDP also declined by two per cent in the quarter, as did construction by 1.8 per cent, but some of the downturn was offset by a six per cent growth in mining and quarrying, and 5.9 per cent in the electricity/water sector.

The finance/insurance services sector also grew by 1.5 per cent in the third quarter, based on improved business in the loans market, and growth in investment portfolios.

PIOJ offered no projections on the financial markets in the current quarter, where, like other world markets, the stock market has plummeted.

The agency did say however that the 0.3 per cent economic decline reflected the instability triggered by soaring commodity prices - mainly oil and grains - and the global financial meltdown which gathered pace in mid-September with the collapse of Lehman Brothers, and which has now plunged a number of rich countries into recession.

john.myers@gleanerjm.com