Jamaica’s economy shrank 11.3 percent in the third quarter of 2020 (July to September), according to preliminary data released by the Planning Institute of Jamaica (PIOJ) on Wednesday (November 18).
The data further revealed that the fall in employment in July 2020, of 135 800 persons, represented the largest year-on-year contraction ever, surpassing the dismal unemployment figures recorded in the 2008 Global Economic/Financial crisis.
The PIOJ said the contraction in the economy was due to a number of factors, primarily the surge in COVID-19 cases and the policies implemented to deal with the pandemic.
While the phased re-opening of the economy has tempered the rate of contraction, all major sectors with the exception of agriculture and construction recorded declines.
Agriculture increased 2.0% over the period with the increase in growth attributed to the Productivity Incentive Programme which provided fertilizer and seedlings to farmers and the Agriculture Excess Buy-Back Programme which provided an outlet for farmers’ produce in light of the oversupply as a result of reduced demand caused by COVID-19.
However, the PIOJ anticipates that the sector will take a short term hit in the next quarter as a result of adverse weather conditions during the October–December 2020 period, which destroyed crops in the field and delayed the replanting efforts of farmers.
The 5.0% increase in the construction industry was attributed to big spending activities by the National Works Agency, NROCC, and other civil engineering expenditure. In addition the industry remained relatively robust owing to its exemption from some COVID-19 management measures.
The sharpest declines were recorded in the service industry with reductions in transport, storage and communication as well as hotels and restaurants .
Transport, Storage & Communication
The transport, storage and communication category declined by 17.4% which according to the PIOJ was primarily driven by a reduction in air, sea and land transportation activities. Air transport was down 82.4% reflecting the decline in passenger movement, down 82.4%. Similarly, air cargo movement also declined, registering a contraction of 18.6%.
Hotels & Restaurants
Hotel and restaurants took a major hit declining by 63.8% impacted by precipitous declines in arrivals from the major source markets and the lack of cruise passengers.
Lower Arrivals were recorded in the main source markets, representing an 81.8 percent decline:
USA, down 78.3% to 97 667 persons
Europe, down 91.2% to 6 924 persons;
Canada, down 88.2% to 7 928 persons.
When will the economy recover?
According to the PIOJ, within the current context, the economic downturn is anticipated for the remainder of this calendar and fiscal year. The agency is forecasting that for the October to December 2020 the economy will further contract within a range of -9% to -11%, resulting in a calendar year contraction in the range of -10.0% to -12.0%.
The planning institute said while the jobs numbers are worse than they were in the 2008 Global Economic/Financial crisis which saw 90,900 Jamaicans lose their employment over a 3-year period, it is is expected that the labour market will bounce back within 2 to 3 years.
According to the PIOJ, in the period prior to the COVID-19 pandemic, the Jamaican economy benefited from macro-economic stability relative to the state of the economy prior to the 2008 crisis.
“Following the crisis of 2008, GDP took 11 years to recover while employment took approximately 8 years. It should be noted however that during the period prior to the COVID-19 pandemic, the Jamaican economy benefited from the implementation of the Economic Reform Programme which resulted in entrenched macro-economic stability evidenced by low unemployment and inflation rates; a declining debt-to-GDP ratio; and seven consecutive years of economic growth,” said the planning institute.
“Given these improvements of economic fundamentals, the Jamaican economy was in a strengthened position at the onset of the pandemic, relative to the state of the economy prior to the 2008 crisis. In light of this improved position, current projections are for GDP levels to recover within 3 to 4 years and the labour market within 2 to 3 years,” added the institute.