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Government commenced the fiscal year with the primary objective of further reducing inflation based on the achievement of single digit movements in fiscal year 96/97. The rationale for that priority in policy was firmly established and it is a subject to which I will return later in my presentation. Inflation Although we do not yet have data for the last month of fiscal year 97/98, the out-turn will be in the range of 8.5 per cent following on the calendar year out-turn of 9.2 per cent. It is of interest to note that the last time Jamaica had two consecutive years of single digit inflation was 1986/87 and 1987/88, a decade ago. The imperative is to continue on that track. When we attain single digit again in 1998/99 it will be the first time since the sixties that we have had three consecutive years of single digit inflation. The achievement of the single digit inflation in both calendar year'97 and fiscal year 97/ 98 is even more significant considering the impact of the drought on domestic agricultural prices, causing the CPI to increase by over 4 per cent during the three months July to September. Put another way, for fiscal year 97/98 those three months accounted for a half of the inflation in the year. Foreign Exchange Market and Management In terms of the foreign exchange market and management, last year was a difficult year. Part of it was due to the problems of an election year. For much of the year, certainly in the period leading up to General Elections, the foreign exchange market was under pressure. Because of the ability of the Bank of Jamaica to intervene and ensure that speculators did not destroy the stability which had been established, the market operated efficiently. However, and I wish to stress this point, the Government is not committed to a fixed exchange rate and in fact, there has been movement with the rate moving from $35.07 in March 1997 to $36.51 in March 1998. The stability in the exchange rate system and the moderate movement in the exchange rate were important contributors to the achievement of the inflation rate. Employment The annual average unemployment rate for calendar year '97 was 16.5 per cent - a marginal increase over the 16 per cent for 1996. The gender distribution of unemployment continues to be a problem with female unemployment at 23.5 per cent being more than twice male unemployment at 10.6 per cent. Monetary Policy Monetary policy in 97/98 was developed against the background of-
Base money continued to be the main operating target of monetary policy and this was targeted to grow at 10.9 per cent. Although the full data are not yet available, money supply growth for the fiscal year was in single digit, contributing greatly to the stability in the exchange system as well as to the attainment of the inflation targets. Survey of Living Conditions The Survey of Living Conditions for 1996 provides very important information to assist in policy directions in terms of social programmes. Of particular note is that 44 per cent of households were headed by females. The proportion of households with females as head was highest in the poorest quintile and lowest in the wealthiest. The education data for 1996 indicate that some previous gains were consolidated and some improvements made in the system. Enrolment of students in the 15-16 age group exceeded 85 per cent for the first time in the 1989-96 period. A further positive is that tertiary level enrolment by students from the rural areas more than doubled over the year. The general health indicators showed improvement in the health status of the country, and under nourishment amongst infants was negligible. Trade Account Merchandise trade deficit in 1997 was US $1,720 million, a deterioration of US 6 1 90 milfion compared to 1996. The deterioration was totally due to a corresponding increase in imports as exports remained at the same level as 1996. The increase in imports stemmed mainly from the growth in consumer goods by US$179 million. These data speak to the need to address initiatives to facilitate growth in exports, a subject to which I will return later. Services and Transfers Account Both Services and Transfers Accounts reflect surpluses in 1997 of US$750 million and US$65 million respectively. The Capital Account surplus was US$178 million, significantly below that of 1996, due largely to a fall off in private capital inflows. Balance of Payments For calendar year 1997, the Balance of Payments recorded a deficit of US$52 million compared with a surplus of US$271 million in 1996. The 1997 out-turn reflected a current account deficit of US$330 million due mainly to the growth of the merchandise trade deficit. Fiscal Out-Turn After several years of surpluses, the Fiscal Budget generated a large de@icit of 7.2 per cent of GDP in 1996/97. The negative growth in the economy and the problems in the financial sector continue to affect revenue performance on the one hand, and the intervention to support the sector led to an increase in debt servicing cost. Against this background, the fiscal deficit targeted for 97/98 was not achieved. This deficit was, however, managed through borrowing, rather than through BOJ support as was the tactic used in previous years. GDP It is no secret that 1997 was a difficult year for almost every sector of the economy and hence, the expectation of negative growth was widespread. The out-turn for calendar year '97 was uniformly bad with few exceptions. The agricultural sector was hard hit by the drought, declining by 14.6 per cent with domestic agriculture declining by 20.1 per cent. Financial services declined by 22 per cent; construction by 4.8 per cent and manufacturing by 2.5 per cent. There was growth in food processing, sugar and rum, alcoholic and non-alcoholic beverages and petroleum refining. Mining grew by 3.3 per cent. Overall the economy declined by 2.4 per cent. This result, although not surprising, represents a major challenge to the Administration in terms of fostering growth in 1998 and the medium-term. || Previous | Table of Contents | Next ||
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