IMF predicts 4.3% growth for Jamaica this year

The International Monetary Fund, IMF, on Tuesday predicted that Jamaica would register economic growth of 4.3 per cent this year, down from the projected growth of 4.7 per cent last year.

It noted that while the Jamaican economy is rebounding, risks to its forecast remain significant.

“Renewed COVID-19 waves in Jamaica or abroad could lead to a more prolonged disruption of tourism, trade, and capital flows. Another risk is posed by the uncertain duration of global inflationary pressures, which have boosted inflation to well above the central bank’s target range of 4-6 per cent,” said the IMF, following the conclusion of the executive board’s 2021 Article IV consultation1 with Jamaica. “Natural disasters continue to be an ever-present risk,” it added.

In the decade preceding the pandemic, Jamaica made good progress to restore macroeconomic and financial stability. Aided by IMF and other multilateral support, the fiscal deficit was brought down from 11 per cent of GDP in 2009 to a surplus; and public debt fell from 142 per cent of GDP to 94 per cent in 2019. Inflation was also brought to single-digit levels, but since last year, it has been breaching targets, and is currently estimated at 7.3 per cent.

The IMF noted that while an early lockdown in 2020 helped contain the number of COVID-19 cases, the impact on the economy was severe, with real GDP shrinking by 10 per cent.

“To mitigate the impact of the pandemic on public health and the economy, the authorities suspended the fiscal rule for a year and swiftly implemented public health measures and a fiscal package to support jobs and protect the most vulnerable segments of the population. The downturn and the fiscal package resulted in a fiscal deficit of 3.1 per cent of GDP in financial year 2020/21,” it said.

In their assessment, the IMF executive directors said Jamaica’s “swift and comprehensive policy response to the pandemic, which helped limit its health and economic impact”, but noted that that once the pandemic recedes, it will be important to resume growth-friendly fiscal consolidation and put public debt on a downward trajectory.

The directors recommended improving revenue and prioritising expenditures to create space for health, education, infrastructure, and growth-enhancing investment, including for climate resilience.

“Enhancing spending efficiency and containing the wage bill will be crucial in this regard,” they said.

CMC