At the quarterly Planning Institute of Jamaica (PIOJ) briefing on the economy, Dr Wesley Hughes (left), director general, gives his report on performance of the real economy in the June 2009 quarter, which he reported contracted 3.9 per cent. With Dr Hughes are his newly promoted deputy, Dr Pauline Knight, the director of social policy planning and research; and James Stewart, manager of the economic, planning and research division. The briefing was on Monday, August 17, at the PIOJ offices in New Kingston. - JIS PHOTOThe Jamaican economy had a few rays of sunshine in agriculture and the hotel sector in the June quarter, but what stood out in the Planning Institute of Jamaica’s latest report on national production was the bad news.
Not only has the bauxite/alumina sector been bludgeoned by a world market in retreat, it was the main contributor to the 62.5 per cent contraction for mining and quarrying GDP in June - 44.9 per cent for the first half year - on the back of shuttered plants, idle capacity, redundancies and lost income, and a retreat of the commercial activity they fostered.
So while agriculture grew 9.2 per cent and financial services 5.1 per cent in the second quarter, real GDP across the spectrum fell 3.9 per cent in the period.
“The decline reflects the downturn in the global economy and its effects on the aluminium and bauxite markets with reduced demand,” said Wesley Hughes, director general of the PIOJ.
Decline in bauxite industry
The pace of the decline has increased, compared to the 1.7 per cent decline in GDP recorded by the Statistical Institute of Jamaica in the March quarter.
The 3.9 per cent PIOJ estimate tracks with the 3.4 per cent to 4.5 per cent contraction reported last week by monetary authority, the Bank of Jamaica, but the final arbiter will be Statin, whose numbers tend to lag the other economic agencies.
In the June quarter, crude bauxite production fell by 52.7 per cent due to lower production at the St Ann Bauxite Company.
And with the closure of Windalco and Alpart in March and May - to reduce the excess supply of alumina held in inventory - alumina production declined by 63.6 per cent.
The decline in mining and quarrying was the biggest contributor to 10.5 per cent contraction in the goods sector.
Services also declined by 1.6 per cent.
With the fallout in the bauxite sector gross foreign-exchange earnings are also expected to fall from about US$1.3 billion in 2008 to less than US$450 million in 2009, further expanding the current account deficit.
PIOJ also further pointed to a decline in the external trade deficit for the January-May period, which it says grew to US$1.44 billion.
Downward movement
Imports for the period declined by 44.7 per cent to US$1,992.8 million, due largely to a decline of 66.4 per cent in Mineral Fuels imports, mainly reflecting the downward movement in crude oil prices the planning agency said.
Further exports for the period declined by 56.6 per cent to US$549.2 million with crude materials inclusive of bauxite and alumina down 66.8 per cent and chemicals down by 80.9 per cent
PIOJ said that the gains in agriculture was “more than mere recovery”, suggesting the sector had shaken off the effects of numerous storms in past years and was for the past quarter the ’star’ of the economy.
Agriculture’s performance was evidence, PIOJ suggested, that the government’s productivity pro-gramme was, literally, bearing fruit.
Manufacture and construction fell by 4.1 per cent and 3.8 per cent, respectively.
In the services industries growth in the finance and insurance services sectors were among the few positives reported by the PIOJ on Monday at its Oxford Road offices.
Hotels top performers
Finance and insurance services sectors, which form a part of the wider services sector, grew marginally by 0.8 per cent for the three-month reporting period.
“Performance was constrained by the general slowdown in economic activities, which resulted in a decline in the stock of loans and advances for consumption purposes and growth in non-performing loans,” PIOJ said.
Hotels and restaurants was the top performer in the services sub-category, growing 3.9 per cent, while electricity and water rose 1.2 per cent.
All others, including real estate, renting and business services, recorded declines.
The economy contracted 3.5 per cent in the half year to June, PIOJ estimated, and will decline by another 3.0 to 4.0 per cent for the September quarter.
