Patterson
YESTERDAY, PRIME Minister PJ Patterson briefed senior journalists at Jamaica House on the progress of the country's economic and social programme. September's Hurricane Ivan seems to have disrupted what otherwise would have been a creditable performance. Below are extended excerpts of the Prime Minister's presentation.
Prior to the arrival of Hurricane Ivan the country was on track to meet the major macro-economic targets for fiscal year 2004/2005 as follows:
The monthly inflation rates fell significantly for the first half of the year (April-September) compared with the corresponding period of 2003/2004
Inflation for the period was 4.7 per cent as against 10.8 per cent in 2003/2004 and was in line with the target for the year of 9 per cent
Estimates of GDP growth showed that output was expanding at a rate closer to 3 per cent or the upper end of the 2-3 per cent range that was targeted (April-June : 2.7 per cent)
Growth was driven by increased activity in manufacturing (5.5 per cent), mining (9.7 per cent) and tourism (visitor arrivals up by over 8 per cent).
The fiscal performance was on track to meet the deficit target of 3-4 per cent.
The current account deficit was declining and NIR was above targeted level although oil prices had risen above expected level.
Hurricane Ivan disrupted production especially in agriculture, mining and tourism and caused damage to physical assets. Damage to assets is estimated at J$23.2 billion and losses to economic flows are set at $13.7 billion for a total of $36.9 billion. GDP growth is now projected at 1.4 per cent for calendar year 2004 as against 2.6 per cent for January-June period.
Major fallout is being felt in:
Agriculture (including fisheries) and is projected at 7 per cent for 2004
Mining where growth is expected to be 3.3 per cent as compared with 9 per cent for January-June period
Tourism, arrivals will increase by 5-6 per cent instead of over 8 per cent in first six months
Electricity and water, due to disruption of services. Growth expected to be 0.3 per cent compared with 3.3 per cent in first 6 months of 2004.
Construction activity will increase and is expected to be double the six-month rate to reach 3.5 per cent (conservative estimate based on cement production and sales as well as on congestion at Port of Kingston arising from increased imports of materials for construction and other investment activity).
Inflation target of 9 per cent has suffered setback because of damage to domestic food crops and increased oil prices. Domestic food crops make up significant part of consumer price index. Increase in food prices and oil are entirely responsible for slippage in monthly inflation rate that was evident in the October figure. Measures taken to reduce tariffs on imported items to supplement local supplies in an effort to reduce the impact of the disruption of production. Despite some cases of price gouging prices have begun to fall or stabilise and it is expected that this will be accelerated as production of short-term crops increases in the coming weeks and in the early months of 2005. Emphasis on replanting must therefore be maintained and assistance to farmers expedited.
In spite of the damage caused by Hurricane Ivan, the government will maintain its efforts to manage the budget process in order to meet the fiscal target for 2004/2005 and to achieve zero balance by end of 2005/2006. The minister of finance has indicated plans to step up revenue collection through more targeted programme and expenditures will be prudently managed while dealing with hurricane damage. Grant funding will help to meet the additional expenditures but efficient use of existing resources is important. Achievement of fiscal target is critically linked to the lowering of interest rates, reduction of public debt and stimulation of economic growth and job creation and hence it is essential that every effort be made to maintain the focus.
DEVELOPMENT AGENDA
* The bauxite industry suffered damage to port facilities during and after Hurricane Ivan and this affected the pace of restoration of production. However, all plants are now approaching pre-Ivan levels and repair work to port facilities are well advanced. Work continues in preparation for the JAMALCO expansion and the training facilities at Breadnut Valley that will prepare the workforce will be opened before the Christmas season.
* Work on development projects has continued even as attention has had to be paid to hurricane relief and reconstruction. Major new investment projects have been launched in tourism industry including:
* Iberostar resort in Rose Hall involving 950 rooms, ground broken at end of October
* The Rose Hall Shopping Complex, groundbreaking also took place in October involving over 3,000 rooms. Two other hotel projects are at advanced stage of design and approvals process (Pinero and AM Resorts). AM Resorts should be ready for groundbreaking by year-end, Pinero in early 2005.
* RIU 3 (850 rooms) is under construction and will be opened in winter 2005 while the opening of Sandal Whitehouse is slated for February 2005.
* New investors have finalised negotiations for another resort development in Hanover that will involve 1,500 rooms and agreement expected to be signed in next few days. Other potential investors are at an exploratory stage.
* Sangster Airport development is continuing at very good pace and the new terminal building is expected to be ready by end of 2005. The master design for Norman Manley Airport will be ready by year-end and construction to begin in early 2005 in order to meet deadline for Cricket World Cup 2007.
* The tourism industry is getting ready for start of the winter season with nearly all properties already re-opened and the few remaining ones will be re-opening by late November for US Thanksgiving holiday and start of the winter season in mid-December. Stopover visitor arrivals had increased by over eight per cent for January-August period but disruption in September and October caused temporary slowdown. Forward bookings indicate a strong pick-up will begin in latter part of November and lead to a buoyant winter season. The recently-held World Travel Market show in London was positive event for Jamaica in terms of strong market interest and business. Spanish hotel chains are already promoting Jamaica and advertising properties for winter 2005 in airline brochures etc.
ENERGY
* Diversification initiatives especially natural gas project points to major opportunity to attract large scale investment for electricity generation, new industrial activities and improved competitiveness of overall economy. Natural gas allows for greater efficiency in energy use and predictable pricing system.
* A project team is being assembled to finalise project components and prepare investment packages in conjunction with T&T.
* In the meantime, oil prices remain high although there has been some slippage from record level of US$56 per barrel reached in recent weeks. There is need for conservation and investment in improving efficiency in all areas. An updated energy policy will cover critical issues and involve broad range of stakeholders.
* Oil bill is expected to exceed US$1 billion for first time and its growth rate exceeding that of combined additional earnings of major export sectors. Urgent action is necessary to contain growth, reduce intensity of energy use and diversify sources over next 10-15 years as world outlook is unfavourable in terms of supply.
