News Release
02 March 2004
JAMAICA:
BALANCE OF PAYMENTS DEVELOPMENTS
July 2003
The current account of the balance of payments recorded a deficit of US$60.7MN in July 2003, relative to the deficit of US$83.2MN in July 2002. The improvement in the current account deficit reflected contractions of US$15.9MN and US$0.3MN in the deficits on the trade and income sub-accounts, as well as an increase of US$17.6MN in net receipts from services. Partly offsetting these changes was a reduction of US$11.3MN in the surplus on the current transfers sub-account. Within the financial account, net private investment inflows were insufficient to finance net official investment outflows, as well as the deficits on the current and capital accounts. In this context, there was a draw down of US$2.5MN in the net international reserves of the Bank of Jamaica during the review month.
Merchandise Trade
The narrowing of the deficit on the merchandise trade account reflected a contraction of US$23.0MN in the value of imports (f.o.b.) partially countered by a reduction of US$7.1MN in earnings from exports. All the major categories of imports recorded declines in July 2003. A lower level of spending on motorcars was largely responsible for the contraction of US$8.5MN in payments for consumer goods imports, while a reduction of US$8.1MN in the value of free zone imports was attributed to the continued scaling down of operations at the free zones. There was a decline of US$5.2MN in raw material imports primarily reflecting reduced spending of US$7.4MN on fuels, which was partly offset by increased purchases of US$2.1MN for other raw materials. Capital goods imports were lower by US$5.0MN, mainly associated with reduced spending on transport equipment and the importation of telephone apparatus for the telecommunication sector during the review month. The decline in export earnings largely resulted from a reduction of US$6.2MN in exports from the free zone.
Services
An expansion of US$12.5MN in net receipts from the travel sub-sector was the main influence on the increase in the surplus on the services account. This was supplemented by a decline of US$5.8MN in net transportation payments and an estimated reduction of approximately US$4.5MN in the expenditure of Jamaicans while travelling abroad. The travel sub-sector benefited from an increase of 12.9 per cent in overall passenger arrivals, driven by growth of 30.4 per cent in cruise passenger arrivals.
Income
The marginal reduction in the deficit on the income account in July 2003 was attributable to a decline in net outflows of US$7.3MN, which was associated with a US$5.0MN reduction in the income of direct investment companies, as well as lower interest payments of US$2.6MN on Government of Jamaica external debt. This outturn was partially offset by decreased inflows of US$5.9MN in net compensation to employees.
Current Transfers
The decline in net current transfers for the review month stemmed mainly from a contraction of US$9.1MN in net private outflows arising from reduced inflows of US$5.4MN and increased outflows of US$3.7MN. This decline occurred in the context of a US$11.4MN expansion in remittances in July 2002. In addition, net official inflows fell by US$2.2MN during the review month.
Capital and Financial Accounts
A deficit of US$1.4MN was recorded on the capital account while a surplus of US$62.1MN was recorded on the financial account. Within the financial account, net private investment inflows of US$79.3MN was insufficient to finance net official investment outflows of U$19.7MN, as well as the deficits on the current and capital accounts. Consequently, there was a draw down of US$2.5MN in the net international reserves of the Bank of Jamaica during the review month.
April to July 2002
The current account deficit improved by US$67.7MN to US$278.5MN, in the period April to July 2003, relative to the deficit recorded for the corresponding period in 2002. The improvement reflected an increase of US$70.1MN in net earnings from services, as well as respective reductions of US$15.7MN and US$4.1MN in the deficit on the income and trade accounts. Partly offsetting these changes was a decline of US$22.2MN in the surplus on the current transfers sub-account. Within the financial account, net private investment inflows of US$140.6MN, which were US$22.5MN below the levels recorded for the similar period of 2002, were insufficient to finance net amortisation of US$70.8MN of Government’s external debt, as well as the deficit on the current and capital accounts. In this context, there was a draw down of US$214.8MN in the net international reserves for the review period.
Merchandise Trade
The improvement in the merchandise trade deficit stemmed from an increase of US$6.4MN in export receipts, partly offset by growth of US$2.3MN in payments for imports (f.o.b.). Major traditional exports and non-traditional exports increased by US$26.0MN and US$1.8MN during the review period, respectively, while declines of US$16.5MN, and US$4.9MN were recorded in receipts for free zone and other traditional exports, respectively. With the exception of bauxite, all the major traditional exports recorded growth during the review quarter. In particular, the value of alumina exports grew by US$17.3MN, reflecting increases of 4.5 per cent and 3.9 per cent in volume and price, respectively, relative to the similar period in 2002. Contractions of US$3.8MN and US$1.2MN in receipts from rum and coffee exports primarily accounted for the decline in other-traditional exports.
The marginal growth in imports reflected an expansion of US$71.8MN in raw material imports, offset by declines of US$42.7MN, US$32.0MN and US$0.9MN in capital, consumer and free zone imports, respectively, relative to the corresponding period in 2002. Increased spending of US$41.3MN and US$30.5MN on both fuels and other raw material imports, respectively, was responsible for the growth in raw material imports. Higher fuel imports were attributed to increased volume and price, while parts and accessories, industrial supplies and food influenced the growth in other raw material imports. The contraction in capital goods imports was mainly attributable to declines in “other machinery” resulting from lower spending on cellular telephones and “transport and equipment” due to the non-repetition of the purchase of buses for the public transportation system in April to July 2002. The reduction in consumer goods imports stemmed from lower expenditure on all its subcategories, in particular, durable goods imports.
Services
The expansion in the surplus on the services account, relative to 2002, primarily reflected an increase of US$70.1MN in net travel receipts. Total visitor arrivals for the review period rose by 14.5 per cent, relative to the corresponding period in 2002, influenced by respective increases of 6.8 per cent and 29.3 per cent in foreign national stopover and cruise visitor arrivals. In addition, there were reductions of US$16.2MN and US$2.7MN in payments for the “transportation” and “other services” subcategories respectively.
Income
The reduction in the deficit on the income account for the review period was attributable to an estimated decline of US$32.8MN in outflows related to the activities of the direct investment companies.
Current Transfers
The contraction in net current transfers reflected respective declines of US$16.0MN and US$6.2MN in net inflows to the private sector and net official transfers. The reduction in net private transfers occurred in the context of significant growth of US$62.0MN in the comparable period of 2002.
Capital & Financial Accounts
A deficit of US$6.1MN was recorded on the capital account for the review period, while a surplus of US$284.6MN was registered on the financial account. Within the financial account, net private investment inflows of US$140.6MN and net official outflows of US$70.8MN were recorded. The net official payment, in conjunction with the deficits on the current and capital accounts, led to a draw down of US$214.8MN in the net international reserves of the Bank of Jamaica. At the end of July 2003, the level of gross reserves stood at US$1165.2MN representing 18.4 weeks of imports of goods and 12.5 weeks of imports of goods and services.
The following table shows the balance of payments for July 2002, July 2003 and for the periods April to July 2002 and April to July 2003.
BALANCE OF PAYMENTS SUMMARY(US$MN)
1/ / 2/ / 1/ / 2/
July / July / Apr-July / Apr-July
2002 / 2003 / Change / 2002 / 2003 / Change
1. CURRENT ACCOUNT / - 83.2 / -60.7 / 22.5 / -346.2 / -278.5 / 67.7
A. GOODS and SERVICES / -131.1 / -97.6 / 33.5 / -520.9 / -446.7 / 74.2
a. GOODS BALANCE / -179.2 / -163.0 / 15.9 / -619.9 / -615.8 / 4.1
Exports (f.o.b.) / 128.3 / 121.2 / -7.1 / 453.6 / 460.0 / 6.4
Imports (f.o.b.) / 307.5 / 284.5 / -23.0 / 1073.5 / 1075.8 / 2.3
b. SERVICES BALANCE / 48.1 / 65.7 / 17.6 / 99.0 / 169.1 / 70.1
Transportation / -22.5 / -16.7 / 5.8 / -85.2 / -69.0 / 16.2
Travel / 111.9 / 124.4 / 12.5 / 332.0 / 383.2 / 51.2
Other Services / -41.3 / -42.0 / -0.7 / -147.8 / -145.1 / 2.7
B. INCOME / -50.3 / -50.0 / 0.3 / -201.0 / -185.3 / 15.7
Compensation of employees / 13.8 / 7.9 / -5.9 / 27.7 / 16.1 / -11.6
Investment Income / -64.1 / -57.9 / 6.2 / -228.7 / -201.4 / 27.3
C. CURRENT TRANSFERS / 98.2 / 86.9 / -11.3 / 375.7 / 353.5 / -22.2
Official / 9.8 / 7.6 / -2.2 / 34.7 / 28.5 / -6.0
Private / 88.4 / 79.3 / -9.1 / 341.0 / 325.0 / -16.0
2. CAPITAL & FINANCIAL ACCOUNT / 83.2 / 60.7 / -22.5 / 346.2 / 278.5 / -67.7
A. CAPITAL ACCOUNT / -0.9 / -1.4 / -0.5 / -5.6 / -6.1 / -0.5
a. Capital Transfers / -0.9 / -1.4 / -0.5 / -5.6 / -6.1 / -0.5
Official / 0.0 / 0.0 / 0.0 / 0.1 / 0.0 / -0.1
Private / -0.9 / -1.4 / -0.5 / -5.7 / -6.1 / -0.4
b. Acq./disposal of non-prod. non-fin'l assets / 0.0 / 0.0 / 0.0 / 0.0 / 0.0 / 0.0
B. FINANCIAL ACCOUNT / 84.1 / 62.1 / -22.0 / 351.8 / 284.6 / -67.2
Other official investment / -30.0 / -19.7 / 10.3 / -9.0 / -70.8 / -61.8
Other private investment 3/ / 75.8 / 79.3 / 3.5 / 163.1 / 140.6 / -22.5
Change in Reserves (minus = increase) / 38.3 / 2.5 / 197.7 / 214.8
1/ Revised
2/ Provisional
3/ Includes errors & omissions
BANK OF JAMAICA
18-Feb-04