PIOJ weighs potential impact of COVID-19 on economy
The impact of the ongoing outbreak of the coronavirus COVID-19, from an economic perspective, would primarily be transmitted through two main mechanisms, namely trade and financial flows, according to an assessment by the Planning Institute of Jamaica, PIOJ.
That is primarily because of travel restrictions implemented to stem the spread of the virus, as well as the impact of the slowdown in the Chinese economy on global trade and investment flows, said PIOJ Director General Dr Wayne Henry.
He said that with respect to trade, Jamaica’s imports from China include intermediate, consumer and capital goods.
Henry noted that intermediate goods are inputs that are critical to the local production process in key industries such as construction and manufacturing, while consumer goods imports from that country include final products such as clothing and appliances, which drive activities in the wholesale and retail trade.
He said Jamaica also imports capital goods from China that are essential for the industrial sectors such as manufacturing, mining and quarrying, as well as construction.
On the export side, external demand from China is critical to the performance of the mining and quarrying industry as a major purchaser of Jamaica’s crude bauxite and alumina, said the director general, while addressing a press conference at the PIOJ’s offices in New Kingston on Tuesday.
Exporters of non-traditional goods such as scrap metal also benefit from trade with China while other areas of export with the Asian country include seafood and tourism services.
“An extended fallout in trade with China will therefore negatively affect the Jamaican economy, particularly through reduced export earnings and weakened production performance within several industries,” said the economist.
With respect to financial flows, during the last decade, China has become a major development partner for Jamaica with significant growth in official loans and grants, as well as foreign direct investment flows.
Those include major loan facilities such as the US$340-million Jamaica Development Infrastructure Programme, which was undertaken during the period 2009-2015 and involved the rehabilitation of roads and bridges.
It also includes the US$300-million Major Infrastructure Development Programme for which the main objective was to continue the improvement of the island’s road network, and the US$326.4-million Southern Coastal Highway Improvement Project, which involves the rehabilitation of the roadway from Harbour View in St Andrew to Port Antonio, Portland.
In addition, major foreign direct investments from China include acquisitions in the mining and quarrying, agriculture as well as in private construction services.
Heny said that given the significant economic ties between Jamaica and China, the possible impact of COVID-19 on Jamaica’s economic performance could include weakened external demand due to a slowing in the Chinese economy and the associated downturn in global trade.
Another possible impact is weakened domestic demand associated with a possible slowing in new investment from China and the expected impact on output and employment levels, as well as the indirect impact on business and consumer confidence locally, he said.
The coronavirus outbreak began in December 2019 when a cluster of pneumonia cases of unknown cause was reported by health authorities in Wuhan, Hubei province in China. The initial cases mostly had epidemiological links to the Huanan Seafood Wholesale Market, which also sold live animals.
The virus is thought to have spread from animals to humans. The earliest reported symptoms occurred last December 1. China has since banned the trade and consumption of wild animals.