Davies
THE BANK of Jamaica (BoJ) said that its continued emphasis on stability in prices and in financial markets should result in faster overall growth for the main sectors of the economy during this year.
In its annual report for the year to December 31, 2000, released to Finance Minister Dr. Omar Davies at the end of March, the BoJ noted that the indicators of output showed an overall upturn in 2000, led by an expansion in services, construction and manufacturing.
Goods production as a whole was estimated to have fallen under the weight of a significant decline in the weather-sensitive agricultural sector for most of the year, as well as a temporary cutback in mining activity. On the other hand, it said, basic services including electricity, water and transportation, as well as tourism and financial services were estimated to have grown during the year.
However, in its outlook for 2001, the central bank said the growth prospects in all those areas seem even more favourable. It said basic services should continue to reflect growth, particularly with the recent privatisation of the Jamaica Public Service Company (JPSCo) in power generation and distribution.
The output of the communications sector should also be boosted with the operation of two new telecommunications companies, it said, noting that "Government's commitment to facilitate and promote new investment in information technology also hold out the promise of expansion in this sector."
Among the other services sectors, the BoJ said, developments in tourism and financial services are expected to be positive, given the proposed level of public expenditure in infrastructure and marketing, as well as the expansion in rooms and attractions already underway. In addition, it said, planned development in port facilities in Port Antonio should help to bolster the cruise shipping industry and marine-based tourism.
According to the report, growth in the goods producing sectors of the economy is expected to resume this year. The resurgence in agriculture, which the BoJ said began towards the end of last year, is expected to extend through this year. It said a similar path is expected in the mining sector with the normalisation of operations at the Gramercy plant in the United States.
The outlook for the world aluminium industry remains strongly positive as it continued to show growth even with a slow-down in the United States economy towards the end of last year, the Bank said, noting that growth continued to be spurred by the recovery in the Asian economies and greater momentum in Europe.
"With the Bank's continued emphasis on stability on prices and in financial markets, the outlook for each of the main sectors of the economy in 2001 point to faster overall growth," said the BoJ report, signed by Governor Derick Latibeaudiere.
In a review of the financial activities for 2000, the report said that for the year as a whole, the Jamaican dollar depreciated by nine per cent against the United States dollar.
This partly resulted from the intense demand in the foreign exchange market between late August and October, notwithstanding an increase in foreign exchange earnings and a heavy inflow of financial investments.
The BoJ said much of the additional demand was related to the desire of local investors to subscribe to a Government of Jamaica Eurobond that was floated in August at a relatively attractive yield.
It said the Bank responded to the demand by selling foreign exchange to the inter-bank market, and later, by introducing nine-month and 12-month Jamaican dollar instruments on which it added an attractive premium. By mid-December, it said, normality had returned to the markets and late in the month the central bank began reducing the premium on its long term rates.
According to the report, the exchange rate movement added directly to the cost of all imports, but the combined effect of the price changes was mitigated by an apparent narrowing of the margins taken by local distributors and the delay in the full pass through to administered prices such as bus fares.
The Bank's focus on monetary stability and financial system soundness bore encouraging results in the year under review with inflation falling to a new low of 6.1 per cent, the report said.
It said the context of the improvement was particularly encouraging as it included the re-emergence of real growth in Gross Domestic Product (GDP), gains in external competitiveness and a near doubling of the net international reserves. In the financial system, it said, all the indicators of soundness and efficiency improved, including a resurgence of lending to the private sector under more prudent practices and careful regulation.
