No choice! - Growth targets will have to be cut, says PSOJ, Hyman
Jamaica's growth projection will take a significant hit, two financial analysts have said following disclosure that the preliminary estimate of damage associated with four events of flooding since March is approximately $4 billion, and agriculture, a key driver, facing a major fallout.
That amount includes $2.1 billion from the National Works Agency (NWA) for the cost to reopen roadways and clear drains, and $1.3 billion the local government ministry said parishes incurred in damage from the May 13-17 floods.
Losses to the agriculture sector from the mid-May devastation is approximately $522 million.
Total costs will go beyond $4 billion, the NWA warned in its submission to Parliament's Infrastructure and Physical Development Committee that considered the impact of the flooding in yesterday's meeting.
"The total estimated cost to reopen roads and clear drains of J$2.1 billion relates solely to the cost of effecting road clearance and drain-cleaning works and does not include any works that are intend to restore affected road infrastructure," the agency said.
Earlier this month, director general of the Planning Institute of Jamaica, Dr Wayne Henry, said Jamaica remained on track to achieve the projected 2.3 per cent GDP growth for the current 2017-2018 fiscal year.
... 'Lower GDP target will have to be announced'
Dennis Chung, chief executive officer of the Private Sector Organisation of Jamaica (PSOJ), and financial analyst Ralston Hyman say Finance Minister Audley Shaw will have to announce a lower GDP target.
"We might be looking more in the region of 1.5 per cent. Already, we had revised down the GDP growth for last year from 1.6 per cent to 1.2 per cent. If that 1.2 per cent trend continues, especially given the fact that there's been the setback, we might be looking around 1.5 per cent," Chung said.
But he said even if Jamaica gets between 1.5 to two per cent, "it's still much better than the average we've been getting."
The revision of last year's figures was caused by underperformance in agriculture and mining. The agriculture sector is now reeling from the floods between March and May.
Compounding the problem, Hyman argues, is the fact that to cover the costs of the damage, coming even before the hurricane season starts tomorrow, the Government will have to reallocate resources. Doing that, he said, includes pulling funds that would go towards capital projects.
"I disagree with Minister [Fayval Williams] that there will be no revision. I believe there will have to be a revision of the growth target. There will also have to be a revision of the inflation target. The Bank of Jamaica will overshoot its inflation target of four to six per cent [for this fiscal year]."