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Financial News

Feb 2014 Financial News

More devaluation, higher insurance premiums to drive up prices this quarter (Jamaica)

Feb 19, 2014

CURRENCY movements and higher insurance premiums should push up prices during an otherwise low-growth March quarter, according to the Bank of Jamaica (BOJ).

Inflation is forecast between 1.5 and 2.5 per cent for the March 2014 quarter, according to the latest central bank Quarterly Monetary Policy Report (QMPR).

Inflation for the fiscal year is expected to fall within the fiscal year range between 8.5 and 10.5 per cent, stated the report, which was published yesterday.

"This forecast reflects some pass-through of exchange rate depreciation as well as a seasonal hike in insurance premiums," according to the report, which reviews monetary policy, inflation and presents the BOJ's perspective on emerging trends.

However, higher than forecast energy costs and currency depreciation will threaten low inflation, it stated.

"Against this background, monetary policy will continue to focus on managing Jamaican dollar liquidity in accordance with achieving the inflation objective and the targets under the Extended Fund Facility," indicated the report.

The BOJ forecasts the island to grow between one and two per cent in the March 2014 quarter.

The outlook is underpinned by recovery in domestic agriculture and improving global economic conditions. Additionally, a seasonal boost in traditional export earnings is expected to support increased economic activity.

"Notwithstanding, domestic demand conditions are anticipated to remain weak as real wages continue to decline," indicated the BOJ.

For domestic output, the risks to the forecast remain "skewed" to the downside.

"These risks include lower than expected business confidence, slower than anticipated global growth, delays in key infrastructural projects and adverse weather," stated the BOJ.

The performance for the December 2013 quarter saw between one and two per cent growth based on recovery in most sectors.

"Growth within the review period reflected estimated increases in all industries with the exception of manufacture and producers of government services," stated BOJ, adding that the economy however was hurt by the deterioration in Net External Demand.

As such the local currency depreciated by 2.6 per cent against the US counterpart for the December 2013 quarter relative to 2.1 per cent for the September 2013 quarter.

"This uptick in the pace of depreciation in the review quarter occurred in the context of seasonally higher net demand for foreign currency to satisfy current account transactions. While there were sufficient net private capital inflows to satisfy these current account transactions, this supply was concentrated within a few entities," stated the BOJ.

The report made special mention of the rebound in the construction sector, which benefited from new private and public projects.

"The industry's performance represented the fourth consecutive quarter of growth and reflected increases in both residential and commercial construction projects," stated the report on construction.

Estimates of residential construction activity, based on preliminary data from the National Housing Trust, reflected an increase of 50 per cent in housing starts for the December

2013 quarter relative to the comparable period of 2012, stated the report.

"For commercial construction projects, the assessed expansion was associated with the continuation of infrastructural development programmes such as Highway 2000, road patching and drain cleaning activities under the Major Infrastructural Development Programme. In addition, there was the commencement of the Karisma hotel and the continuation of the RIU Palace, Memories and Marriott hotels," stated the BOJ.


Source:
Jamaica Observer
Wednesday February 19, 2014

http://www.jamaicaobserver.com/business/More-devaluation--higher-insurance-premiums-to-drive-up-prices-this-quarter_16086516