Sun | Jan 21, 2018

Unemployment in Jamaica still chronic, says IMF

Published:Wednesday | April 19, 2017 | 12:00 AM
IMF headquarters in Washington, D.C.

The International Monetary Fund (IMF) said that while Jamaica has experienced seven consecutive quarters of positive growth and that employment is growing, the unemployment situation remains a chronic issue.

It said real gross domestic product (GDP) seems on target to grow by 1.7 per cent in fiscal year 2016-17, driven by agriculture, construction and tourism, while inflation and the current account deficit remain contained, supported by low oil prices.

"The unemployment rate is declining, albeit still high at 12.9 per cent in October 2016," said the Fund in its report on the first review under the three-year standby agreement with Jamaica released yesterday.

Noting that maintaining social support for the reform programme will be critical, the IMF said improvements in growth prospects and declining unemployment should garner broader social support for government policies.




"However, upcoming wage negotiations and efforts to streamline the size of the public sector could create new social and political risks," it warned. "Such reforms, therefore, need to be carefully planned, managed and communicated to the broader public," it added.

External shocks such as uncertainty from United States economic policies, more rapid pace of Fed normalisation and unanticipated spikes in oil prices also present potentially adverse risks to the economy, it said.

IMF staff appraised that domestic confidence indicators are at an all-time high, inflation is subdued, and unemployment is on a modest decline. "The continued pursuit of the Government's reform programme should help attract private investment and bolster growth and job creation," the staff suggested.

In its latest country report, released with the first review, the IMF noted that unemployment rates for people below the poverty line are nearly double the overall rate (25 per cent versus about 13 per cent).

It also indicated that income earners below the poverty line mostly engage in lower-income jobs in agriculture (25 per cent); retail and equipment repair (20 per cent); construction (11 per cent), and domestic work (about 9 per cent). Among poor households, only 27 per cent of heads have secondary schooling or more, versus 45 per cent among non-poor household heads.

The Fund said discussions on the review centred on fiscal year 2017-18 Budget that maintains a seven per cent of GDP primary surplus target, rebalances from direct to indirect taxes, and directs greater resources to capital spending; increasing social transfers to the poor, reducing the size of the public sector and increasing its efficiency, improving the monetary policy toolkit and modernising the means by which the central bank undertakes the purchases and sales of foreign exchange.

It also focused on strengthening the institutional framework for financial stability, and fostering sustained and equitable growth.

The Fund said preserving the social consensus for reform will be critical in sustaining the gains to macroeconomic stability and resilience that have been achieved over the past four years.




Noting that decisive policy actions are required to improve public sector resource allocation and efficiency, the Fund said reducing the Government's wage bill, including by strengthening budgetary controls, redefining the size of government, and lowering pension costs is key to shifting Jamaica's limited fiscal resources to productive spending.

At the same time, a broader effort to reduce the number of public bodies and improve their monitoring will enhance their governance and transparency, and reduce fiscal risks, it added.

The staff report, prepared by a team of the IMF for the executive board's consideration on a lapse-of-time basis, followed discussions that ended on March 3, 2017 with Jamaican officials.

The executive board takes decisions under its lapse-of-time procedure when it agrees that a proposal can be considered without convening formal discussions.