Clarke holds back on economic estimate for COVID-19
Published:Friday | March 20, 2020 | 12:22 AM
Based on the market estimates of GDP, the Jamaican economy generates $5.7 billion of value each day, a tenth of which is contributed by government services.
For the three quarters of 2019 for which economic data has been published, government services accounted for $160 billon of the $1.57 trillion of market GDP estimated by Statin.
Essentially, producers of government services generate more than $580 million of value on a daily basis and is second only to the retail/distribution sector in its contribution to GDP.
That means a reduction of state services, albeit at a partial level, will impact the economy adversely. That impact will be intensified by the private sector’s participation in the conjoined fight against the spread of the coronavirus.
Finance Minister Dr Nigel Clarke said Wednesday that he was not prepared to speak publicly about the likely impact to GDP from the measures taken by the Government.
Contacted for comment on the likely scenario analyses that guided the decision for a weeklong adjustment to government services, the minister reiterated a statement made in Parliament on Tuesday that the adverse economic impact of the coronavirus was unavoidable, but declined to comment further.
Ratings agency Moody’s, in a note on Jamaica, sees a mixed picture. It expects the Jamaican economy to decline due to fallout from reduced travel and tourist arrivals, but believes the resulting reduction in import demand by the tourism sector would act as an offset; and that Jamaica would also benefit from lower world oil prices.
Oil, which is one of the big drivers of the country’s current account deficit, is now trading at around US$23 per barrel.
At last estimate for the September 2019 quarter, the Jamaican economy was growing at an anaemic rate of 0.6 per cent. Statin is expected to report on the December fourth quarter next week.
How Jamaica performs beyond that period will be determined by the fallout from the virus, both internally and among major trading partners like the United States and Europe, both of which are attempting to stave off recessions.
Clarke is expected next Tuesday to table a third Supplementary Budget for the fiscal year that comes to a close in two weeks, one that reflects the impact of COVID-19 allocations. And although the budget for fiscal year 2020-21 is still being debated and is yet to be voted on by lawmakers, Clarke has already advised he will file an early revision to those Estimates of Expenditure as well, early in the fiscal year, which kicks off April 1.
The 2020-21 Estimates has a $7-billion contingency for COVID-19 response, but the minister – amid defending the decision to do a $18-billion tax cut in an emergent crisis, the full economic impact of which is uncertain – has insisted the Government has sufficient resources to boost the initial allocation in the event it is needed.
On Tuesday, Clarke announced that the banks and other regulated companies had agreed to forego the $3 billion they would have benefited from in the tax package – representing savings from the reduction in the assets tax – and that those funds would be used instead for COVID-19 contingencies, pushing the allocation to $10 billion.
Jamaica recorded its first coronavirus-related death on Wednesday, an elderly man from Clarendon who was said to be visiting the island from New York with his family.