By Balford Henry, News Editor
Latibeaudiere
THE BANK of Jamaica has reported mixed performance in the domestic economy for the September quarter.
The bank also announced that in terms of the demand for currency and the possibility of renewed pressure on the foreign exchange market before the Christmas season, it will maintain "a tight monetary stance".
The bank will also reduce interest rates gradually as the conditions in the market allow, it stated.
In its quarterly report issued yesterday, the BOJ said that the economy's performance during the September 2002 quarter was influenced by a number of domestic and external factors. They included adverse weather conditions, perceptions of weak foreign exchange earnings, uncertainties associated with the October general election and weaker than forecasted recovery in the United States economy, "all of which contributed to instability in the foreign exchange market".
However, the bank said that, despite those factors, inflation was within projection, the pace of economic activity improved and the Central Bank maintained reserves sufficient to cover about 19 weeks of estimated goods and services imports.
Governor of the Bank, Derick Latibeaudiere, told a quarterly press briefing yesterday that the rate of inflation for the quarter was 2.4 per cent, "well within the projected range of 2.3 per cent to 2.9 per cent that we indicated in August."
He said that the Net International Reserves (NIR) were at US$1.6 million at the end of September, meeting the target under the IMF Staff Monitored Programme (SMP), in spite of the challenges that were faced during the quarter."
In addition, the bank's estimates indicated that there was economic growth in the quarter, notwithstanding the adverse impact of poor weather conditions on the agriculture sector and sluggish recovery in the tourism industry.
Mr. Latibeaudiere said the bank was of the view that the performance of the economy, in the near-term, would depend critically on there being relative stability in the foreign exchange market and the continuation of relatively low inflation expectations.
He said that, in addition, the containment of public sector demand would be important in contributing to a stable macroeconomic environment.
"The latter, to a large extent, will be dependent on the pace of recovery in the real sector which, in turn, will be influenced by developments in the world economy," he pointed out.
He said that on a sectorial level, the quarter will be influenced mainly by the performance of the mining, construction, basic services and miscellaneous sectors.
"We must, however, note that the recovery in mining and tourism is still being hampered by the sluggish recovery in the world economy, as fears of terrorist attacks still abound, the distrust of large corporation caused by the series of corporate malfeasance continues and the implications of war with Iraq looms," he added.
Overall growth will also be constrained by the performance of the agricultural sector, which has suffered severe dislocation from the effects poor weather conditions, he said.
"In the context of the challenges that may emerge from the high levels of liquidity in the system, the seasonal demand for currency and the possibility of renewed pressure on the foreign exchange market before the Christmas season, the Bank will maintain a tight monetary stance. The Central Bank will be reducing interest rates gradually, as the conditions in the market allow," he said.
