PIOJ reports big economic contraction in June - Matches BOJ top-end forecast of 10% fiscal year decline
This week’s presentation of the overview of the economic forecast for the April to June quarter by the Planning Institute of Jamaica, PIOJ, occurred at a later time than is the norm and is explained by challenges in obtaining data due to the containment measures associated with managing the spread of the COVID-19 disease, Director General Dr Wayne Henry said Wednesday.
He said the gap between estimates tend to be large in periods of extraordinary shocks.
The PIOJ estimated that for the period January-March 2020, the economy contracted by 1.7 per cent. However, the subsequent estimate from the Statistical Institute of Jamaica, Statin, the final arbiter on economic data, showed a contraction of 2.3 per cent, a variation of 0.6 percentage points from the PIOJ’s initial estimate.
Still, it’s not unusual for the estimates to vary. The estimates done by Statin, which is the official statistical agency, are considered more accurate because it has more data from which to do its analysis.
But Henry noted on Wednesday, that the variances are not usually as wide as the March quarter estimates.
As for the second quarter, Henry, addressing a virtual press conference on Wednesday, said real GDP contracted by an estimated 18 per cent in the April-June period relative to the corresponding quarter of 2019.
Typically, that estimate would have been announced by PIOJ six weeks after the close of the quarter. But its briefing on Tuesday was 10 weeks out. Within that period, the country voted in general elections, but Henry did not reference the September 3 polls and preceding election campaigning and nominations as to whether they too had in any way impacted PIOJ’s data gathering process.
The largest decline in the second quarter was recorded on the services side of the ledger, as expected, in the hotels and restaurants industry, which contracted by an estimated 87.5 per cent, reflecting a sharp decline in visitor arrivals and the number of persons using restaurant services.
Total visitor expenditure at US$16.2 million was 98.1 per cent lower than that recorded in the corresponding period of 2019.
Impact of COVID-19 containment measures
The overall economic contraction largely reflected the impact of the implementation of measures to manage the COVID-19 pandemic, which included the closure of international borders to passenger movements and which curtailed external demand, and, essentially, halted all tourist-related activities.
It also reflected the implementation of curfews, which restricted movement, the opening hours of businesses, and adversely impacted the demand for goods and services; as well as weakened demand associated with lower income due to job losses and reduced work hours.
Over the first six months of the year, January to June, economic contraction is estimated at 10.2 per cent. The goods-producing industry is estimated to have contracted by 4.4 per cent, while the services industry contracted by 11.5 per cent.
The PIOJ is further projecting a decline in output within the range of 8 per cent to 10 per cent for the September quarter. In his one reference to the general election, Director General Henry said the spending by political parties was expected to give fillip to sectors such as retail and distribution in the third quarter.
The agency also anticipates that all quarters of this fiscal year, ending March 2021, will record a contraction in output. “Consequently, the PIOJ’s projection for output is for a contraction within the range of 8.0 per cent to 10 per cent for the full fiscal year,” Dr Henry said.
It matches the forecast by the monetary authority, Bank of Jamaica, which is forecasting economic contraction within a range of 7 to 10 per cent.
Within that period, the country voted in general elections, but Henry did not reference the September 3 polls and preceding election campaigning and nominations as to whether they too had in any way impacted PIOJ’s data gathering process.
Output for the agricultural sector fell 8.5 per cent, largely reflecting the impact of drought across the island.
In the construction sector, economic activity declined by an estimated 3 per cent; while finance and insurance services declined at a similar pace, reflecting the impact of measures implemented to limit the spread of the COVID-19 pandemic on economic activities and return on investment.
The manufacturing industry was a bit more resilient, but it also declined by 2.9 per cent.