General Trends

According to ECLAC's flagship report 'Economic Survey of Latin America and the Caribbean 2009-2010', the Jamaican economy deteriorated in 2009, forcing the government to enter a 27-month International Monetary Fund (IMF) stand-by arrangement which will provide US$ 1.2 billion over the period. The agreement, which was signed in February 2010,  was designed to restore confidence in the Jamaican economy. While the proximate
 cause of the economic problems was the global recession and its impact on export demand, deeper issues lay in the cumulative effects of an expanding public debt, relatively large current account and fiscal deficits, and falling investor confidence. source: ECLAC

Economic Policy and Conditions

In Jamaica's National Development Plan "Vision 2030 Jamaica, Planning for a Secure & Prosperous Future" Director General of the Planning Institute of Jamaica (PIOJ), Dr. Wesley Hughes, declared that “…2030 is not a magic number. We won’t wake up overnight and see development…” As such, the Plan outlines a vision for our country in which we can all have a stake in the present as well as the future, through a process of transformation involving our collective participation.

This National Development Plan integrates 31 sector plans prepared by Task Forces, comprising stakeholders from public and private sector bodies, civil society and International Development Partners (IDPs).

The Economy

According to ECLAC's latest report, Preliminary Overview of the Caribbean economies 2008-2009, Jamiaca with its high dependency on food and oil imports, the considerable importance of the tourism and commodity exports sectors, and the significant weight of workers’ remittances, is very vulnerable to external shocks. Thus, the global economic crisis hampered output growth and macroeconomic stability. Consequently, GDP would have declined by 0.5% in 2008, while accumulated inflation reached 16.9% (year end). Moreover, there are fears that the adverse evolution of the trade balance could be aggravated by a further deterioration of the terms of trade, while the surplus in the services balance has declined due to higher transportation and freight costs. The overall consequence of this evolution has been a significant widening of the current account deficit. As the global economic crisis keeps unfolding, GDP contraction in 2009 is forecast at 2%.

Tourism
Reflecting the global economic crisis, tourist arrivals decreased slightly. By November 2008 accumulated tourist arrivals totaled 2.5 million, recording a marginal contraction of 1%, relative to the same period of 2007. Cruise arrivals, a key indicator for tourism activity, declined significantly (8.8%). However, this contraction was partially offset by a strong increase in stopover arrivals of non-resident Jamaicans (15.7%), which could be linked to the economic recession in the United States and Europe.
source: ECLAC

Economic Survey of the Caribbean 2007-2008

The survey provides an overview of the economic performance of countries of the Caribbean Development and Cooperation Committee (CDCC) for the year 2007 and their outlook for 2008. The last chapter presents country briefs with the main macroeconomic developments in 2007 and the outlook for 2008.

Jamaica posted a moderate GDP growth rate of 1.2% in 2007, which was below expectations. The current account deficit widened significantly and annual price inflation rose to 16.8%,almost three times the 2006 level. A combination of negative externalities, such as the Hurricane Dean or the continuous increase in the international prices of Jamaica’s main imports, mainly explains the slowdown in the economy.

A general election held in September 2007 resulted in a change of government, with the Jamaica Labour Party coming into office after 18 years of uninterrupted rule by the People’s National Party. The new government has established as main objectives for its economic and financial policies the increase of GDP growth, the reduction of the public debt burden and the control of price inflation. However, with just over 50% of the budget already dedicated to service the external and domestic public debt, freedom for fiscal and economic manoeuvres is quite constrained, making a priority the implementation of structural measures like a comprehensive tax reform, an expenditure improvement or a reduction in debt-service obligations.

The challenging international environment, especially relevant considering the vulnerability of Jamaica’s economy to external shocks, complicates perspectives for 2008. This high exposure to external shocks advises caution in the setting of economic goals, which has been reflected in the official forecast for GDP real growth for 2008, in the range of 2.5% to 3.5%, and the expectation for a recurrent current account deficit and a negative central government balance.

The government’s success against criminal activities will be another key factor to provide economic, political and social stability to the country. Currently, Jamaica has one of the highest murder rates in the world and the economic impact of criminal activities is not to be dismissed: according to the United nations Office on Drugs and Crime (UNODC), the overall cost of crime is equivalent to 3.7% of Jamaica’s GDP, and the rise in criminal activities is specially affecting the tourism sector, which is highly sensitive to safety and security issues.

Review of the Macroeconomy 2007/2008

Jamaica Budget Presentation 2008/2009

During FY 2007/08 the economy was confronted with a number of challenges. For the most part,the challenges were triggered by exogenous factors. The world witnessed and continues to experience rapidly rising oil and agricultural commodity prices, a severe tightening of international credit markets and a sharp housing downturn in the United States. The convergence of these three factors is unprecedented and resulted in a very challenging external environment.

The country was also faced with challenges arising from the passage of Hurricane Dean in August 2007 as well as the prolonged period of adverse weather conditions which followed and which destroyed agricultural crops creating shortages of domestic food items. Together these challenges had the effect of undermining the pursuit of price stability in Jamaica and contributed to a significant increase in inflation, from 7.4% in the previous fiscal year to an estimated 19% in fiscal year 2007/08.

Debt Management Strategy 2008/2009

The Strategy outlines the path to be pursued in managing the outstanding stock of debt while meeting the Government’s financing needs at minimum cost and risk. In FY2008/09 the Debt Management Strategy will continue to ensure that debt management policies and the operational framework are consistent with nternational best practices.
source: Ministry of Finance Paper No. 22

Economic Performance for 2006

Main Soource: 2006/07 Jamaica Budget Opening Presentation,Economic Statistics February 2007, and Statistical Digest November 2006
Links: Ministry of Finance and Planning Jamaica, and Statistical Insitute of Jamaica

The country of Jamaica has been steadily improving its economic performance after the recent Hurricane Ivan destruction in 2004. In 2006 Jamaica faced adversities such as, inflation due to high food-prices, unprecedented increases in oil prices, Domestic and External Public debt, and the obvious sectoral recovering from the impact of Hurricane Ivan. In light of these set backs, Jamaica still generated a minor yet creditable real GDP increase of 1.4%. Unemployment has decreased to 10.9% (from 11.4% in 2005), where improvements in Net International Reserves, recovering agriculture and tourism receipts held the country from being in a desperate situation.

The minister of finance and Planning (Dr. The hon. Omar Davies) stated that tourists’ earnings surpassed the previous year’s numbers by 6.5% growing to $11.5 billion dollars. And as Jamaica continues to improve its quality for tourism, respect and appreciation will be shown by various hospitality organizations (as of recent, Jamaica has been awarded the Caribbean’s Leading Destination at the World Travel Awards held in Turks and Caicos (September 2006)).

Future Prospects for Jamaica

According to a 2004 report dealing with Caribbean trade arrangements with the E.U., the Jamaican informal economy is worth close to 50% of the country’s GDP earnings. To find the determinant of this progressing hidden sector, an investigation of the direction of its real sector is pertinent for solving the missing pieces of Jamaica’s development.

Due to oil import bills, there has been a widening of the Balance of Payments deficit in 2006, which could not be compensated by exports from the once promising bauxite sector. The government’s inability to meet the target of the latter period in 2006 was caused by the impact on economic production by natural disaster shocks, leading to a deterioration of the overall deficit.

The most defining structural factor, of all the economic downfalls of Jamaica in 2006, should be its inability to contain or manage Public Debt. Jamaica’s public debt stood at an alarming $847 billion in 2006, an increase of 11.5% in the previous fiscal year. IMF conducted a working paper on Public Debt and Productivity in Jamaica, where the study illustrated if total debt doubled, then there would be a reduction in productivity growth of about 1.5%. Moreover, the paper states that high debt adversely affects investment and productivity by (i) distorting the allocation of investment toward less productive areas, (ii) reducing the scope for public sector investment, which complements the role of increasing the effectiveness of private investment.

Though productivity growth must not be equated with economic development, addressing the most inferior sector (e.g. Public Debt) can supplement other governmental interventions, and therefore draw the Jamaican economy to attain better standards and targets.