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

61
The Services balance surplus widened fuelled by the rise in travel receipts, which in turn
responded to the good prospects of the Tourism sector for the year. Tourist arrivals, mainly
stopovers, and tourist expenditure registered significant increases. For their part, the income
account imbalance rose mainly due to profit repatriation, while current transfers and more
specifically private transfers expanded.
The capital and financial account’s surplus is mainly explained by the increase in inflows
associated with the issue of a government 200 million Eurobond in February and a US$50
million bond in March.
VII. 4 The expected performance of the economy without the disaster
1. Main trends
The Jamaican economy was expected to expand by 2.6 percent in the absence of the
disaster propelled by the Mining, Tourism and Manufacturing sectors. Agriculture was
expected to exhibit a decline while construction was projected to remain on its moderate
growth path.
The authorities had targeted a fiscal deficit of 3.8 percent of GDP based on an increased
rate of growth of the economy in conjunction with efforts at fiscal consolidation and a
downward trend in the spectrum of interest rates.
The rate of inflation was forecasted to decline, close to the one digit level relative to the
previous year, as a result of price and exchange rate stability and in spite of the rise in
international oil prices.
The good performance of exports and the decline in imports visible in the first part of the
year led the authorities to revise their estimate of the current account deficit from 13
percent to 10 percent of GDP. The deficit was expected to be amply financed by official
financial flows due to the issue of Euro and regional bonds resulting in an increase in the
stock of net international reserves.
2. Economic policy
2.1 Fiscal policy
For the fiscal year 2004/2005 the fiscal deficit was expected to decline from –5.6 percent to
3.8 percent of GDP and projected to reach equilibrium by FY 2005/2006. The expected
result for FY 2004/2005, is predicated on a growth rate of 3-4percent and an inflation rate
of 9 percent with focus mainly on constraining the growth of the two most important
categories of expenditures, wages and interest payments on the domestic debt (which
represent 34 percent and 40 percent, respectively of total expenditure) and to a lesser extent
by an increase in tax collections.
61