February 25, 2020

The Planning Institute of Jamaica (PIOJ) held their Media Briefing today, discussing the review of the economic performance of Jamaica for the October to December 2019 period.

Dr. Wayne Henry, Director General of PIOJ, highlighted the macroeconomic performance for the October-December 2019, mentioning. “real GDP is estimated to have grown by 0.1% relative to the corresponding quarter of 2018.” Growth in Real GDP was due to a rise in the ‘Service Industry’ which recorded an estimated growth of 1.5 percent. However, the ‘Goods Producing Industry’ declined by 3.8 percent.

Overview of Real Industry Developments:

• All industries within the Services Industry recorded growth for the period October to December 2019. The industries estimated to have registered the largest growth rates were Hotels & Restaurants (3.5 percent), Finance and Insurance Services (3.4 percent) and Electricity & Water Supply (2.7 percent).
• The contraction of the Goods Producing industry was due to the impact of the decline in Mining & Quarrying (contracted by 38.7 percent) and Construction (down 2 percent) which was partially tempered by growth in Agriculture, Forestry and Fishing (up 3.0 percent) and Manufacturing (up 0.4 percent).

 

• For 2019, real GDP was estimated to have increases by 0.9 percent. This represents the seventh consecutive year of GDP growth. The Services Industry was estimated to have grown by 1.6 percent, while Goods Producing Industry contracted at an estimated 0.6 percent. The industries registering the strongest growth during the year included: Hotels and Restaurants (up 4.9 percent); Finance and Insurance Services (up 3.4 percent); Other Services (up 1.9 percent); and Manufacturing (up 1.8 percent).

Other Macroeconomic Highlights 

 

• For the reported period (October-December 2019), the Jamaican economy experienced inflation of 2.4 percent, which originated from an increase in the Food & Non-Alcoholic Beverages division (up 4.2 percent).

 

• The Total Labour Force for October 2019 was 1,345,100 persons, an increase of 10,200 persons relative to the 2018 corresponding period. The unemployment rate decreased to 7.2 percent relative to 8.7 percent in October 2018, depicting the lowest unemployment rate on record.

Production Performance by industry

• Real Value added for Agriculture, Forestry and Fishing increased by 3 percent and was facilitated by more favourable weather conditions. In addition, other Agriculture Crops was estimated to have grown by 5.2 percent as a result of higher output from seven of the nine crop groups. Traditional Export Crops declined by 0.3 percent which was due to the lower production of Banana & Plantain (down 5 percent) and Cocoa (down 31.3 percent).

 

• Real value added for Mining & Quarrying industry declined by 38.7 percent, reflecting a downturn in the production of alumina (down 44.9 percent) and crude bauxite (down 0.1 percent). The primary source of this decline was the closure of the Alpart Alumina refinery as well as lower production levels from the other operational alumina plants. The alumina capacity utilization rate decreased from 69.2 percent, a 31.2 percentage point fall, relative to the corresponding quarter of 2018. The bauxite capacity utilization rate remained relatively unchanged at 57.7 percent compare with the corresponding quarter 2018.

 

• The Manufacturing Industry advanced by 0.4 percent, reflecting growth in the other Manufacturing sub-industry and a relatively flat output from the Food, Beverages and Tobacco sub-industry. PIOJ noted the, “the Other Manufacturing sub-industry was estimated to have grown; reflecting higher output Chemicals and Chemical Products, while Petroleum Products remained relatively flat”.

 

• Real Value added for the Construction sub-industry declined by 2 percent, reflecting a contraction in the Other Construction component which outweighed the estimated growth in the Building Construction component. The decline in the Other Construction was due to reduced capital expenditure on civil engineering activities. Furthermore, a decline in expenditure on civil engineering activities were estimated to have decline as expenditure by the National Works Agency (NWA) was down 54.2 percent, to $3.2 billion due to the winding down of projects as well as delays in the start-up of new projects. Additionally, the “Jamaica Public Service (JPS), down 30.7 percent to $4.2 billion and Port Authority of Jamaica (PAJ), down 41.1 percent to $2.2 billion. The growth in the Building Construction component was bolstered by increases in the total Housing Starts by the NHT, up 133.4 percent to 1,909 units, as well as work in progress on previously started developments.”

 

• PIOJ highlighted that, “the Finance & Insurance Services industry registered estimated growth of 3.4% in real value added during the quarter, reflecting projected increases in net interest income on the stock of loans at deposit taking institutions; and fees and commission income.”
•  Real value added for the Hotels and Restaurants industry expanded by 3.5 percent. The growth in Foreign National Arrivals, which increased by 5.8 percent stimulated this increase. Additionally, there was a 6.5 percent increase in Stopover Arrivals to 660,412 persons. Total Visitor Expenditure increased by 8.1 percent to US$932.20 million.

The Director General went on to state that, growth in real GDP for Fiscal Year 2019-2020 is projected to be within the range of 0.0 percent to 1.0 percent.

Outlook

The Director General highlighted the short-term prospects for the Jamaican economy which are generally positive, based on:

• “The continued strengthening of productive activities in some of the Goods Producing and Services Industries, led by the recovery of Agriculture, as the economy recovers from adverse weather conditions.
• Growth in the Hotels & Restaurants Industry with preliminary data for January 2020 indicating an increase in airport arrivals by 4.0 percent.
• A general increase in industrial activities as reflected in the growth in electricity consumption for January 2020 of 3.5 percent to 270.2 million kilowatt hours (kWh).”

 Upside Risks:

• Stronger than expected external demand, especially impacting export industries such as Hotels & Restaurants and Manufacturing
• Stronger than projected domestic demand associated with increased employment levels, and an increase in access to loans and advances.
• Higher than expected capacity utilization in some industries, particularly within Manufacturing and Agriculture consequent of improved weather conditions.

 Downside Risks:

• The impact of adverse weather conditions on the economy, and its constraining effect on the output in the Agriculture, Forestry & Fishing industry.
• Plant downtime associated with relatively aged equipment and planned closures for maintenance activities, especially within the Mining & Quarrying and Manufacturing industries.
• Slower than expected growth in the economies of Jamaica’s main trading partners, particularly as a result of the Novel Corona Virus, COVID-19, which may negatively impact the movement of people, trade and external demand for goods and services.

The Director General concluded, “The out-turn for the calendar year represents the highest annual level of economic activity ever recorded, and reflects the sustained efforts of successive administrations in laying the foundation to achieve more robust and inclusive growth. In addition, the outlook for financial year 2020-2021 is also positive, with projected growth within the range of 0.5 percent to 1.5 percent. The main drivers of growth are expected to be the Hotels & Restaurants, Agriculture and Construction Industries.”

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