Briefing | Jamaica’s macroeconomic outlook for 2017-2018
HOW IS THE ECONOMY?
Jamaica's macroeconomic indications have remained robust over the last nine months, displaying no overshooting or undershooting in response to global geopolitical and/or geo-economics occurrences. Prices (inflation) have remained stable on the books.
The exchange rate has depreciated by less than one per cent since the start of year, moving from $128.55 to $129.6 per US dollar. The Bank of Jamaica has indicated that from an assessment of preliminary Balance of Payments data, Jamaica's current account recorded a deficit of US$29.8 million for the June 2016 quarter, an improvement of US$98.7 million relative to the corresponding period in 2015.
The improved estimate is because of a reduction in the value of what Jamaica purchases from the rest of the world and an improvement in the amount of services Jamaica sell to the rest of the world throughout that period. This they believe will continue trending downwards, given that there is more alignment between the Jamaican dollar and its major international trading partners, namely the US, Pound, Yuan and Canadian.
WHAT IS THE INTERNATIONAL PERCEPTION?
According to the World Bank: "The reform programme being implemented in Jamaica is beginning to bear fruit: Institutional reforms and measures to improve the investment climate have started to restore confidence in the Jamaican economy. The country's credit rating has improved, and Jamaican bonds trade at a premium in international markets. Continued prudent macroeconomic policies and careful liability management reduced total government debt to 122 per cent of gross domestic product (GDP) by the end of 2016."
WHAT ABOUT GDP GROWTH FORECAST?
The World Bank has estimated that the Jamaica economy grew by 1.7 per cent for the calendar year 2016 and forecasts two per cent growth for 2017, assisted by improved economic conditions in the United States, low oil prices, and investment reforms.
The Planning Institute of Jamaica (PIOJ) has indicated that the Jamaican economy recorded real GDP growth of 0.7 per cent per annum for the FY2013/14 and the FY 2015/16, the regular average for the country over the last 50 years.
According to the PIOJ, improved economic growth in the nation hinges on:
1. Continued implementation of Economic Reform Programme. "Since end March 2016, all Benchmarks and Quantitative Performance Targets have been met and economy on track to meet all targets."
2. Implementation of additional legislative and regulatory reforms; over 50 legislative and regulatory reforms including tax incentives, credit bureaux, collateral registry, omnibus banking legislation have already been implemented.
WHAT ABOUT POVERTY AND UNEMPLOYMENT?
The latest unemployment statistics, according to the Statistical Institute of Jamaica, shows that the unemployment rate is approximately 13 per cent. Youth unemployment remains considerably higher for the youth, which is more than 28 per cent.
As it relates to poverty, the latest official estimates show that poverty headcount fell from 25 per cent in 2013 to 20 per cent in 2014. No recent poverty data is available to my knowledge.
WHAT IS THE CURRENT POSITION WITH THE IMF?
Recall that the Government of Jamaica holds a loan on standby arrangement with the International Monetary Fund (IMF) as of November 2016. This is precautionary against unforeseen shocks that require foreign currency remedy.
The IMF conducted an interview with Nigel Clarke, Jamaica's ambassador of economic affairs and deputy chair of the Economic Growth Council. Dr Clarke spoke about the nation's priorities and new initiatives, the role of multilateral institutions in supporting economic reforms, and policies under way to raise growth, create jobs, and achieve better social outcomes.
Read the full Question & Answer at https://www.imf.org/en/News/Articles/2017/05/09/na051017-jamaicas-econom...
WHAT ARE YOUR MAIN ECONOMIC PRIORITIES AS AMBASSADOR OF ECONOMIC AFFAIRS FOR JAMAICA?
Our ambassador outlined that the nation's key economic priorities are to maintain economic stability and supporting growth. He explained that, "It is important for Jamaica to continue implementation of the structural reforms required to entrench macroeconomic stability and fiscal sustainability while, at the same time, ensuring that economic expansion is given all possible support."
WHAT MORE CAN JAMAICA DO TO SUPPORT JOB CREATION?
According to Dr Clarke, agriculture and business process outsourcing are the two main industries currently poised to absorb the most jobs in the Jamaican economy.
He said, "In the agricultural sector, the two key impediments are access to reliable water and a lack of strong linkages with the tourism sector.
To ensure that agriculture can grow sustainably, employing more Jamaicans, we will need to invest in water storage and distribution systems, and irrigation. But the Government doesn't have the capacity to do this on its own, and will need to partner with the private sector."
The agriculture sector absorbs 20 per cent of the working force of the island; however, it contributes five per cent GDP. Therefore, with the emergence of Cannabis Indices globally, Jamaica can see this as a perfect opportunity for a greater and sustainable input into the economy coming from the agriculture sector.
Overall now more than ever, Jamaica is in the best position to maintain stability, increase growth and continue gradually improving infrastructure and social services necessary to transform into a developed nation.
- Dr Andre Haughton is a lecturer in the Department of Economics on the Mona campus of the University of the West Indies. Follow him on Twitter @DrAndreHaughton; or email firstname.lastname@example.org