News Release
10 January 2003

JAMAICA:
BALANCE OF PAYMENTS DEVELOPMENTS


July 2002 & April to July 2002

 The current account of the balance of payments recorded a deficit of US$74.7M in July 2002, relative to the deficit of US$38.2M recorded in July 2001. The widening in the deficit on the current account reflected expansions of US$28.3M and US$11.9M in the deficits on the trade and income accounts, respectively, as well as a reduction of US$8.2M in net earnings from services. Partly offsetting these changes was an improvement of US$11.9M in the surplus on the current transfers sub-account. Within the financial account, net private investment inflows were insufficient to finance the deficit on the current account and net official investment outflows. Consequently, there was a drawdown of US$38.3 million in the net international reserves of the Bank of Jamaica during the month.

Merchandise Trade
The widening in the deficit on the merchandise trade balance largely reflected an expansion of US$36.3M in the value of imports
(f.o.b.), which was partially countered by an increase of US$8.0M in earnings from exports.

All the major categories of imports registered increases in the review month. In particular, respective increases of US$22.4M and US$19.1M were recorded in the c.i.f. values of raw material and consumer goods imports. The expansion in raw material imports was primarily attributed to growth in the value of fuel imports, associated with an increase in oil prices.  Increased spending on food and other durable items, such as, cellular telephones, was responsible for the expansion in the value of imports of consumer goods.

The improvement in export earnings in July 2002 reflected respective increases of US$11.7M, US$1.2M and US$3.0M in the values of major traditional, other traditional and re-exports, which were partly countered by declines of US$5.6M and US$2.1M in the values of free zone and non-traditional exports, respectively. The growth in the major traditional category was driven primarily by an expansion in the volume of alumina exports as realised market price declined by 8.4 per cent relative to July 2001. Reductions in the export of garment largely accounted for the decline in non-traditional and free zone exports.

Services
The reduction in the surplus on the services account for the month stemmed primarily from a decline of US$6.6M in the net receipts of the travel sub-sector.  Contributing to this out-turn was an increase of US$12.0M in gross travel payments, reflecting higher expenditure by Jamaicans travelling overseas. In addition, net payments for transportation services increased by US$2.1M due to higher freight charges on imports.


Income

The widening of the deficit on the income account mainly reflected higher interest payments on Government of Jamaica external debt.


Current Transfers

The increase in current transfers was largely attributable to the expansion of US$11.4M in net inflows to the private sectors.


Capital and Financial Accounts

A deficit of US$1.4M was recorded on the capital account for July 2002. In contrast, the financial account registered a surplus of US$76.1M, an increase of US$36.0M, relative to the surplus in July 2001. Within the financial account, net private investment inflows of US$67.8M were insufficient to finance net official investment outflows of US$30.0M, as well as the deficits on the current and capital accounts. In this context, the net international reserves fell by US$38.3M for the month.


April to July 2002

For the period April to July 2002, the current account deficit widened by US$143.9M to US$322.5M, relative to the deficit recorded for April to July 2001. This out-turn reflected expansions of US$117.7M and US$17.6M in the trade and income deficits, as well as a reduction of US$61.2M in net earnings from services. Partly offsetting these changes was an improvement of US$52.6M in the surplus on the current transfers sub-account. Within the financial account, net private capital inflows were insufficient to finance the net official investment outflows, the current and capital account deficits. Consequently, there was a draw down of US$197.7 million in the net international reserves for the period.


Merchandise Trade

The increase in the deficit on the merchandise trade account stemmed from a contraction of US$68.4M in export receipts, as well as an increase of US$49.3M in payments for imports (f.o.b.) relative to the corresponding period of F/Y 2001/2002. With the exception of other traditional exports and re-exports, all the export categories declined during the review period. Major traditional exports contracted by US$39.6M, largely reflecting reductions of US$34.1M and US$4.6M in earnings from the export of alumina and sugar, respectively. The contraction in earning from the export of both alumina and sugar was due to reductions in both volume and price. There were declines of US$16.8M and US$14.6M in the value of non-traditional and free zone exports, respectively, reflecting the continued downturn in the garment industry.


Payments for imports of capital and consumer goods increased by US$49.0M and US$43.5M, respectively, in the review period relative to April to July 2001.  These increases were partly offset by respective contractions of US$11.1M and US$19.7M in the value of raw material and free zone imports. The growth in capital goods imports was attributable to increased expenditure on transport and communication equipment, while the expansion in consumer goods imports stemmed from higher spending on food, motorcars and cellular telephones. Within the raw material category, a lower value for fuel imports was recorded due largely to oil prices being lower during the review period.


Services

The contraction in the surplus on the services account primarily reflected a decline of US$64.3M in net travel receipts, as well as an increase of US$12.3M in net transportation payments.
Partly countering these increases was a reduction of US$15.4M in net payments for other services. For the travel sector, total stopover arrivals for the period fell by 6.3 per cent, relative to April to July 2001, influenced by reductions of 6.4 per cent and 5.2 per cent in foreign national stopovers and non-resident Jamaican visitor arrivals, respectively. In addition, lower net receipts to the sector were influenced by the growth in expenditure by Jamaicans travelling abroad.


Income

The widening in the deficit on the income account for the review period was mainly attributable to higher interest payments on Government of Jamaica external debt.


Current Transfers

The increase in net receipts from current transfers for the review period, relative to the comparable period of FY2001/02, resulted from an increase
of US$62.0M in net inflows to the private sector, which more than offset the decline of US$9.4M in net official transfers.


Capital & Financial Accounts

A deficit of US$7.6M was recorded on the capital account for the review period, while a surplus of US$330.1M was recorded on the financial account.
Within the financial account, net private investment inflows of US$141.4M were insufficient to finance net official outflows, as well as, the deficits on the current and capital accounts. Consequently, there was a drawdown of US$197.7M in the net international reserves of the Bank of Jamaica. At the end of July 2002, the level of gross reserves was US$1,799.0M, representing approximately 29.5 weeks of imports of goods and 19.7 weeks of imports of goods and services.


The following table shows the balance of payments for July 2001, July 2002 and for the fiscal periods April to July 2001 and April to July 2002.

BALANCE OF PAYMENTS SUMMARY (US$MN)

 

July1/

July2/

 

 

Apr-July1/

Apr-July2/

 

 

2001

2002

Change

 

2001

2002

Change

1. CURRENT ACCOUNT

-38.2

-74.7

-36.5

 

-178.6

-322.5

-143.9

A. GOODS and SERVICES

-93.3

-129.8

-36.5

 

-333.8

-512.7

-178.9

a. GOODS BALANCE

-147.1

-175.4

-28.3

 

-501.6

-619.3

-117.7

        Exports (f.o.b.)

120.1

128.1

 8.0

 

519.6

451.2

-68.4

        Imports (f.o.b.)

267.2

303.5

36.3

 

1021.2

1070.5

49.3

 

 

 

 

 

 

 

 

b. SERVICES BALANCE

53.8

45.6

-8.2

 

167.8

106.6

-61.2

        Transportation

-22.7

-24.8

-2.1

 

-81.4

-93.7

-12.3

        Travel

 110.6

104.0

-6.6

 

380.9

316.6

-64.3

        Other Services

-34.1

-33.6

0.5

 

-131.7

-116.3

15.4

 

 

 

 

 

 

 

 

B. INCOME

-21.3

-33.2

-11.9

 

-128.7

-146.3

-17.6

        Compensation of employees

8.1

14.4

6.3

 

18.6

27.8

9.2

        Investment Income

-29.4

-47.6

-18.2

 

-147.3

-174.1

-26.8

 

 

 

 

 

 

 

 

C. CURRENT TRANSFERS

76.4

88.3

11.9

 

    283.9

336.5

52.6

        Official

4.4

4.9

0.5

 

24.6

15.2

-9.4

        Private

72.0

83.4

11.4

 

259.3

321.3

62.0

 

 

 

 

 

 

 

 

2. CAPITAL & FINANCIAL ACCOUNT

38.2

74.7

36.5

 

178.6

322.5

143.9

A. CAPITAL ACCOUNT

-1.9

-1.4

0.5

 

-8.9

-7.6

1.3

a. Capital Transfers

-1.9

-1.4

0.5

 

-8.9

-7.6

1.3

        Official

0.0

0.0

0.0

 

0.2

0.1

-0.1

        Private

-1.9

-1.4

0.5

 

-9.1

-7.7

1.4

 

 

 

 

 

 

 

 

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

40.1

76.1

36.0

 

187.5

330.1

142.6

        Other official investment

-24.1

-30.0

-5.9

 

308.9

-9.0

-317.9

        Other private investment 3/

49.8

67.8

 18.0

 

118.4

141.4

23.0

        Change in Reserves (minus = increase)

14.4

38.3

 

 

-239.8

197.7

  

         Government Reserves

        0.0 

        0.0

 

 

 0.0

0.0 

 


1/ Revised


2/ Provisional


3/ Includes errors & omissions