Tourism to record most severe contraction in June quarter
THE PLANNING Institute of Jamaica, PIOJ, said the tourism sector is expected to record the most severe contraction in activities during the April to June 2020 quarter, given the sharp decline in stopover and cruise passenger arrivals.
That will be manifested in areas including transportation, attractions, entertainment, and hotel and restaurant services, said PIOJ Director General Dr Wayne Henry.
He also said the effect of the COVID-19 pandemic on the United States, Jamaica’s main trading partner, will have a significant impact on external demand for the island’s goods and services.
Tourism activity is captured under different sectors, and while PIOJ did not provide an estimate of the impact on Jamaica’s largest foreign exchange earner for the June quarter – data released last week indicate that remittances will overtake tourism earnings this year – it referenced the fallout in the context of a projected contraction of 12-14 per cent for the Jamaican economy in the June quarter.
Foreign exchange inflows for Jamaica from tourism activity is projected to fall to US$995 million post-COVID, according to the country report on Jamaica released by the International Monetary Fund, while remittances are expected to account for US$1.9 billion of inflows.
Measures including the closure of Jamaica’s borders to passenger traffic, restrictions on operating hours, as well as physical-distancing protocols have negatively impacted key drivers of economic activities, such as hotels and restaurants, manufacturing, transportation, entertainment, and construction services, said Henry.
Spillover effects are also expected to be felt in related areas, such as the wholesale and retail trade, as well as finance, he said, in reviewing Jamaica’s economic performance for the quarter to March 2020 and the economic outlook for April to June.
With respect to the electricity-and-water industry, data for April indicates that electricity consumption has fallen by six per cent due to lower electricity sales in all categories except residential, which grew by 15.2 per cent.
That was partially attributed to the implementation of the daily curfew imposed and the work-from-home policy the Government implemented as part of the restrictive measures to curb the spread of COVID-19.
Henry said all other customer categories recorded contractions in sales ranging from -11.1 per cent to -45.7 per cent during April.
“This out-turn is expected to continue until these initiatives have ended,” he said.
The remote-work measures will be lifted on June 1.
For the water component, data for April 2020 indicate that consumption increased by 5.8 per cent. He said that performance can be attributed to a general increase in the use of water for sanitization purposes in both residential and commercial establishments, as well as the stay-at-home protocol which resulted in increased usage.
The PIOJ head said Wednesday that preliminary data indicates the COVID-19 pandemic began affecting the Jamaican economy in the March quarter, which contracted 1.7 per cent. PIOJ now projects that growth for the full fiscal year just ended, 2019-20, will be around 0.1 per cent, down from the previous forecast of 0.6 per cent.
“Going forward, quarterly economic contractions are anticipated, at least for the remainder of calendar year 2020, with a return to growth performance projected for the January to March quarter of 2021,” the director general said.
“However, the uncertainty regarding the depth and the duration of the COVID-19 pandemic poses the main downside risk to this projection,” he said.
For the fiscal year ending March 2021, the Jamaica economy is projected to contract within a range of 4-6 per cent, which Henry said would be “the weakest economic performance in almost four decades, that is, since a contraction of 4.6 per cent was recorded in 1985”.