Jamaica Gleaner
Published: Friday | July 17, 2009
Home : Business
Jamaica clips US$564m from Q1 oil bill - Current account deficit narrows
Lavern Clarke, Business Editor

The Bank of Jamaica, on the waterfront in downtown Kingston. The central bank said it drew on US$144 million of reserves in the January to March period. - FILE

Jamaica narrowed its current account deficit by close to half a billion dollars in the January to March quarter, on the back of a vastly reduced oil bill that fed into a near US$778 million reduction in the country's import bill.

In the first quarter, Jamaica spent US$1.09 billion on procurement of foreign goods, but that was a near 42 per cent containment of imports relative to a year ago.

Symptomatic of the domestic recession and the depressed global economy, Jamaica's exports suffered heavily, declining by US$305.7 billion or 47 per cent to US$348.6 million as bauxite/ alumina plants shuttered to ride out the downturn.

Alumina exports were down US$191.7 million in the period, due to a 2.9 million tonne reduction in export volumes.

The country sold 6.5 milliontonnes of alumina in the first quarter, at average price of US$182.7 per tonne, compared to the US$329.7 per tonne fetched for the 9.4 million tonnes exported in the comparative period last year.

The US$472 million narrowing of the merchandise trade gap fed into the improvements seen on the current account which, though still in the red, fell from US$705.3 million in the first quarter of 2008 to US$209.9 million in this period, for overall improvement of US$495.4 million.

BOJ data indicate that last year's current account deficit was a record within this decade, for first quarter current deficit outcomes. At one point, 2004, the current account was actually in surplus, though just by US$1.4 million.

Improvements not enough

Still, the central bank says the improvements in the current period were not enough, forcing it to draw on its reserves to balance off the accounts.

"Flows from official and private sources were insufficient to finance the current account deficit. Consequently, there was a decline in the NIR of US$144.4 million during the period," said the Bank of Jamaica's March statistical bulletin on the balance of payments.

On the services account, travel receipts, which capture tourism activity, were down by US$48.8 million, from more than half a billion to US$437 million. But services still grew overall by US$23.9 million.

"The increase in the surplus on the services sub-account resulted from a fall in freight charges, related to the reduction in imports," said BOJ.

"The impact of the fall in freight charges was partially offset by lower earnings from tourism, associated with a fall in the estimated average daily expenditure of stopover visitors."

Mineral fuel imports fell by US$564 million - in a period when world oil prices had dropped to US$40 to US$50 per barrel and as low as US$34 - accounting for the majority, 72 per cent, of the reduction in the import bill.

Remitted profits fall

Also propping up the accounts was a reduction in profits remitted overseas, which the central bank said was responsible for the US$46 million improvement on the income sub-account, "principally related to lower imputed profit remittances of direct investment companies, mainly attributed to the downturn in the mining sector."

Oil and other petroleum products cost Jamaica US$310 million in the current quarter, or more than 64 per cent less than the US$874.1 million spent in the 2008 period. But with oil process having risen above US$70 and in the June quarter, the country's oil bill is expected to rise again.

Net private transfers, which capture remittances, were also down by US$49 million to US$419.6 million, with forecasts of further declines until economic activity, and jobs, pick up in the major source market, the United States.


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