Jamaica: Macro-Socio-Economic and Environmental Assessment of ...

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The performance of Manufacturing registered the highest rate of growth in the first two
quarters of the year (6 percent on average). This was the highest level of increase in the past
eight years. This reflected the increased output in cement production, food processing, and
in the output of beverages and tobacco. It also responded to the stability in the operations of
the local petroleum refinery.
Construction activities grew moderately (2 percent) maintaining the trend of the past year
in spite of the increase in cement production. The behavior of the sector was also affected
by the scant growth in imports as the sector is highly dependent on foreign construction
materials, machinery and equipment.
The Tourism sector remained buoyant (7 percent and 11 percent for the first and second
quarters of the year) as stopover arrivals increased their numbers by 10 percent. Similarly,
tourism expenditure grew by 7 percent. Cruise passengers who have less of an effect on the
economy expanded by 1.5 percent.
3.2 Prices, wages and employment
In the first six months of the year, the rate of inflation declined from 5.6 percent to 3.8
percent in relation to the previous year. The year 2003 witnessed a higher than expected
inflation rate due to the effect of the tax measures, mentioned above, on the general price
level. The rate of inflation in 2004 responded to the stability of the nominal exchange rate
and of the general macroeconomic conditions.
In terms of its components, the movement in the rate of inflation responded in the first
quarter to the increase in the food and drink category (28 percent of the total) and housing
and other expenses categories (26 percent of the total). In the second quarter, the food and
drink category was the main driver of inflation (80 percent of the total). Prices within this
category were affected by supply shortages due to drought conditions, which reduced the
availability of agricultural products and a ban on beef imports from the United States of
America.
3.3 The external sector
The global balance of payments yielded a positive result as the surplus in the capital and
financial account more than offset the deficit in the current account. As a result, the
economy increased its stock of net international reserves in relation to the previous year.
Reserves increased by US$439 million and the stock of net international reserves grew
from US$1220 to US$1604 million for the period, January-June.
The current account deficit improved both through the increase in traditional exports and
the decline in imports. The behavior of exports reflected the dynamism of mining and
quarrying, manufacture and export agriculture, and more precisely a favourable external
environment, improved technical conditions and expansion in productive capacity and
higher rates of capacity utilization.
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