ECLAC predicts job cuts for Jamaica
The United Nations' regional body, ECLAC, and the Jamaica Employers' Federation (JEF) separately warned of possible job cuts in 2013 arising from the expected austerity measures linked to the pending International Monetary Fund (IMF) deal.
A new country report by ECLAC, which references the IMF on numerous occasions, indicates that Jamaica's economic activity remains so sluggish that even with a deal, flat growth is predicted in 2013.
"Growth is projected at 0.1 per cent in 2013, assuming that an agreement is signed with IMF. This agreement will likely have a strong emphasis on fiscal restraint and public-sector reform, which could lead to job cuts," said the ECLAC country report released within the context of a growing Latin America.
Jamaica's unemployment rate improved from 14.1 per cent in January 2012 to 12.8 per cent July 2012. ECLAC said the majority of the newly employed were women.
"Economic conditions have been worsened by the lack of a new agreement with the IMF, which would secure international funding for the balance of payments, as well as other forms of support," said ECLAC.
JEF President Wayne Chen agreed with ECLAC, arguing that the body made a "sound observation" based on empiricism.
"There will be some dislocation in the short term, but if the reforms are done correctly then it will provide more jobs in the medium term," Chen told Wednesday Business.
Asked whether job cuts would contradict the Government's mandate of creating employment via measures such as its Jamaica Emergency Employment Pro-gramme, Chen said no.
"I don't think it would contradict government policy. Government has to do what it has to do to protect jobs (in the medium term). But in the short term there will be job losses," he responded.
ECLAC also raised concerns that Jamaica, which is already heavily indebted, continues to fund nearly half of its budget with new debt.
"It is a matter of concern that while just over 55 per cent of the Budget is expected to be financed by tax revenue, the remaining 45 per cent is to be financed by a combination of debt raised on the domestic financial market and overseas borrowing, when debt is already at very high levels," said ECLAC.
"The Budget was presented on the understanding that fiscal consolidation was necessary to encourage growth, but such consolidation is unlikely," ECLAC.
The financial damage caused by Hurricane Sandy in October 2012 represents an additional complication, the UN agency said. It commended Jamaica's stable inflation rate but raised concerns about the slipping exchange rate.
ECLAC is one of the United Nations' five regional commissions, created in 1948 to contribute to the economic development of Latin America and strengthen economic ties among countries in the region and with other nations of the world. Later, the scope of its work was broadened to include Caribbean nations.