Matched against itself, Jamaica shines in new IMF forecast
Published:Wednesday | June 29, 2011 | 12:00 AM
Stephen Jackson, Business Reporter
JAMAICA IS projected in 2012 to grow more than two percentage points, its fastest rate in six years, but this will still equate to one of the worst-performing economies in the world, according to forecasts in the updated World Economic Outlook released in June.
The island's 2.4 per cent projected economic growth in 2012 will trail every region listed and equate to roughly half that of the world average of 4.4 per cent, according to the report published by the International Monetary Fund (IMF) last week.
Its last comparable performance was 2.7 per cent growth in 2006.
The IMF increased Jamaica's growth projection from 2.0 per cent in its April forecast to the current figure but cautioned that generally Caribbean countries were inhibited by an over-reliance on the slow-growing United States at 2.6 per cent.
"The recovery in many Central American and Caribbean countries has gained some strength, although growth continues to be constrained by strong real links with slower-growing advanced economies - particularly the United States - less favourable terms of trade, and in some cases high public debt," stated the WEO.
Jamaica entered into a US$1.27 billion standby agreement with the IMF in February 2010, enabling it to weather the local and global recession which started in the US in 2008.
In February, the IMF country representative, Dr Gene Leon, conditionally backed Government's attempt at unveiling a pro-growth programme.
Leon signalled that he expected any additional spending to be smartly targeted at prodding aggregate demand, but would also want a clear demonstration of offsets that maintain performance targets under the standby agreement. Leon was not reached for comment for this story.
The June WEO report indicated that Jamaica would underperform every economic region in 2012, including Latin America at 4.0 per cent, the Caribbean at 3.5 per cent, emerging and developing economies at 6.6 per cent, and advanced economies average growth at 2.6 per cent.
Jamaica was among the fastest-growing nations in the world in the 1960s, aided by the expansion of the bauxite sector.
It, however, slowed tremendously over the last 40 years with cumulative annual growth averaging one per cent. The island's economic challenges have changed throughout the decades. However, its political leadership within both political parties remained largely unchanged.
The fastest-growing Caribbean economy in 2012 is projected to be Haiti at 8.8 per cent, due to its quake-recovery efforts, followed by Dominica Republic at 5.5 per cent, Trinidad and Tobago at 2.6 per cent and the Eastern Caribbean countries at some 2.6 per cent.
Global power China is projected to grow at 9.5 per cent in 2012, India at 8.0 per cent, Brazil at 3.7 per cent, Mexico at 3.7 per cent, Russia at 3.4 per cent and the United States at 2.5 per cent.
"Growth remains robust in Latin America and the Caribbean (LAC) and is projected to exceed 4.5 per cent in 2011. The expansion has been strongest in South America, where high commodity prices and easy external financing conditions are fuelling domestic demand which, if left unchecked, could soon lead to overheating," the report stated about Latin America.
The IMF added that Latin America recovered quickly and strongly from the global financial crisis. In most countries, prudent, countercyclical policies in the years leading up to the crisis allowed the deployment of macroeconomic stimulus to counteract its effects on activity, it stated.
"The region expanded by more than 6.0 per cent in 2010, ledby South America, where high commodity prices, easy external financing conditions, and accommodative macroeconomic policies stimulated domestic demand," said the report.
"Output gaps have closed in much of the region and early signs of overheating are appearing: inflation is rising, current account deficits are widening, and credit and asset prices are growing rapidly. Rising global fuel and food prices are adding to the challenge of containing inflation and protecting the poor."
Jamaica is projected to grow 1.6 per cent this year after three years of contraction.
Global inflation picked up from 3.5 per cent in the last quarter of 2010 to 4.0 per cent in the first quarter of 2011, more than a quarter of a percentage point higher than projected in the April 2011 World Economic Outlook.