Mon | Jul 13, 2020

Economy may shrink up to 14% in June quarter

Published:Thursday | May 28, 2020 | 12:00 AMMcPherse Thompson/Assistant Business Editor

The Jamaican economy contracted by an estimated 1.7 per cent in the January to March 2020 quarter compared with the corresponding quarter of 2019 and is projected to decline by 12 to 14 per cent for the April to June quarter.

Planning Institute of Jamaica (PIOJ) Director General Dr Wayne Henry said, however, that the pace of economic growth could be enhanced if there is stronger-than-anticipated global demand associated with an early rebound in global economic activities and quick recovery of key industries.

The economic projection for fiscal year 2020-21 is for a contraction within the range of 4.0 per cent to 6.0 per cent, the PIOJ said.

The out-turn for the January-March quarter, if it materialises, would have ended an extended period of 20 consecutive quarters of no economic contraction, that is, the economy grew in 19 quarters and remained flat in the October-December 2019 quarter.

The January-March 2020 out-turn largely reflected the impact of the implementation of measures to manage the COVID-19 pandemic commencing in mid-March, said Henry, in reviewing the economic performance via a virtual press briefing on Wednesday.

That included the closure of international borders to inbound passenger traffic, which curtailed external demand and essentially halted tourist-related activities; curfews that restricted business hours; the closure of all schools; and the implementation of stay-at-home and work-from-home orders.

It also reflected the impact of lower-capacity utilisation within the mining and quarrying industry following the temporary closure of Jamaica's largest alumina refinery in September 2019 to upgrade capacity.

It was also based on a continued slowdown in the construction industry consequent on the completion of major road projects and the slow start-up of new ones.

The contraction was tempered by an uptick in agriculture production as well as increased manufacturing.

During the quarter, the mining and quarrying industry contracted by an estimated 37 per cent; the construction industry by 2.0 per cent; the goods-producing industry by 1.5 per cent; the services industry by 1.5 per cent, and the hotels and restaurants industry by 13.9 per cent.

During the review quarter, the agriculture, forestry, and fishing industry grew by an estimated 7.8 per cent; manufacturing by 2.7 per cent; electricity and water supply, 2.1 per cent; transport, storage, and communication by 2.6 per cent; finance and insurance services by 1.3 per cent, while wholesale and retail trade and repair and installation of machinery industry remained flat.

Henry said that for April-June 2020, growth prospects for the economy are generally negative based on the anticipated impact of the COVID-19 pandemic.

"It is projected, as at today, that the economy will contract within the range of negative 12 per cent to negative 14 per cent during April-June 2020," he said.

"This projection is based on information and expectations to date, which are very fluid and will change as new information becomes available," he added.

The PIOJ director general said that for fiscal year 2020-21, among the key assumptions underpinning current projections for economic performance are that there will be no major second-phase outbreak of the COVID-19 pandemic in Jamaica and globally, and that the rate of contagion will remain within manageable bounds of the health sector?s capacity.