“The international market For the period October 1, 2012 to September 30, 2013 witnessed high levels of volatility in response to economic indicators which pointed to a rocky global recovery. In the US, there were promising signs in unemployment which fell to 7.2% in September 2013 from 7.8% in the prior year.

This, together with the recovery in the housing market, prompted the Federal Reserve to consider tapering its bond buy-back programme – Quantitative Easing (QE 3) in May. QE was one of the key accommodative policy measures implemented to return the US economy to growth by increasing liquidity and keeping interest rates low.

Following this pronouncement, however, stocks declined, bond yields rose and higher rates threatened the recovery in the housing market. This forced the Federal Reserve to delay its decision at the September meeting until the economy and key sectors showed signs of sustainability. With economists forecasting that the two-week US government shutdown will have a negative impact on growth in the final quarter of 2013, a QE taper could be delayed even further. Soft conditions in the US have prompted the Bank of Canada to revise its growth forecast for that economy to 1.6% for 2013, down from 1.8% in July as the expected pick-up in Canadian exports is yet to materialize.

The Eurozone has emerged from an 18-month recession helped by increased output from the larger economies such as Germany and France. However, most economists believe the recovery is too sluggish to overcome the deep problems ailing the region, including mass unemployment, high debt levels and weak financial institutions, any time soon. The European Commission is forecasting that the Eurozone will grow by 1.1% in 2014.

The familiar theme in the advanced economies is that growth is positive but weak and could remain fragile in the near future. This will continue to filter through to the developing countries which are largely export dependent. The International Monetary Fund (IMF) forecasts, that the global economy will expand by 2.9% in 2013 and 3.6% in 2014. This projection takes into account the downside risk relating to the expected slowdown in the developing economies.”

Hon. Michael Lee-Chin OJ
Chairman
National Commercial Bank Jamaica Limited