DR Peter John Gordon, director of the Economic Planning and Research Unit at the Planning Institute of Jamaica (PIOJ), is optimistic that the economy can grow by 2.5 per cent next year but will not reach the six per cent target projected by the Jamaica Labour Party (JLP) in its election manifesto.

According to Gordon, the country’s fiscal position has been adversely affected by Hurricane Dean, which brushed the island’s eastern and southern shores on August 19, damaging homes, businesses, crops and infrastructure.

“Productivity has to be significantly increased to realise real growth. The goal of some six per cent per annum is not likely for another three years,” Dr Gordon told the Pan Caribbean Financial Services Economic Breakfast on September 13 at the Terra Nova Hotel in Kingston.

“For the first half of 2007, the country recorded economic growth of 1.8 per cent. It is now projected that for 2007, the economy will grow by only 1.1 per cent,” Dr Gordon disclosed.

He said that growth performance would be negatively impacted by the slowing of activities in agriculture, mining and quarrying, electricity, and water. Agriculture enjoyed three per cent growth between April and June this year, while electricity and water topped the list with 3.9 per cent growth for the same period.

Conversely, Dr Gordon revealed that the areas of construction and the distributive trade would enjoy additional growth due to the effects of Hurricane Dean. These sectors grew by 3.6 per cent and 2.8 per cent respectively for the period April to June 2007.

According to Dr Gordon, the growth performance during the quarter took place against the background of relative stability in the exchange rate market, which experienced 0.7 per cent real depreciation and an inflation rate of 1.9 per cent.

In addition, Dr Gordon said that the fiscal deficit of $9 billion, which was $4.7 billion less than programmed and $0.6 billion higher than that recorded in the corresponding quarter of 2006, aided in achieving growth.

“Revenues and grants totalled $55.7 billion in April to June 2007, $0.2 billion lower than programmed revenue, while expenditure totalled $64.7 billion, $4.9 billion lower than programmed expenditure,” Dr Gordon said.

He said that for the calendar year 2007, inflation is expected to be between nine and 10 per cent.

“Food prices will be driven upward mainly by the impact of Hurricane Dean on domestic crops and higher international commodity prices as well as high fuel costs,” Dr Gordon noted.

He told the meeting that the Statistical Institute of Jamaica would be using a new basket to calculate inflation in a few weeks that would include cell phones and computers.

His report also showed that the external trade balance had deteriorated by eight per cent to a deficit of US$1,294.9 million for January to April 2007.

Imports increased by 8.3 per cent to $1,965.6 million while exports increased by nine per cent to $700.8 million. This was heavily impacted by imports of machinery and transport equipment that went up by 23 per cent and manufactured goods by 25.9 per cent. Exports of crude materials jumped 11.3 per cent and mineral fuels by 14.4 per cent.

“Hurricane Dean has slowed the country’s economic growth, making it more difficult to achieve the goals set for this year,” he reiterated.

“No doubt, more will have to be done to improve productivity and efficiency to meet certain objectives.

We have to wait and see some of the policy shifts before we can analyse the impact.”