Joint report of the OECD, ECLAC, CIAT and IDB
The Jamaican economy recorded positive growth of 0.2 per cent in 2013 having contracted by 0.5 per cent in 2012.This is good news given that the economy posted positive growth in the last two quarters of 2013 after a period of stagnation. This was followed by positive growth of 1.6 per cent in the first quarter of 2014, with the goods producing sector growing by 5.6 per cent and the service sector growing by 0.3 per cent. It is anticipated that in 2014, growth will be 1.2 percent and positive growth is expected from such sectors as mining and quarrying, agriculture, forestry and fishing and construction. The hotel and restaurant sectors are expected to improve due to positive performances of the major tourist markets, Europe and the United States.
The economic policies of 2013 were conducted within the framework of a 48-month Extended Fund Facility (EFF) with the IMF. Its approval resulted in Jamaica receiving loan inflows totalling US$ 207.2 million, of which US$ 87.9 million was allocated for budgetary support. The agreement is also expected to attract support in excess of US$ 1 billion from other multilateral agencies.
The major challenges to the economy were the fiscal stress arising from a high debt of 131.9 per cent of GDP and the deteriorating exchange rate, despite the signing of the IMF agreement. Because of these developments, the Jamaica Dollar registered a year-on-year depreciation of 13.3 per cent vis-à-vis the United States dollar in December 2013, following a depreciation of 6.6 per cent for 2012. Apart from the inflationary impact of depreciation due to the increased price of imported goods in the local currency, this also affects the external debt burden, as the country’s debt is denominated in foreign exchange.
Despite this depreciation however, inflation remained in the single digits for the calendar year. Headline inflation was 9.5 per cent in 2013, up from 8.0 per cent in 2012. The data indicated that Jamaica’s current account deficit declined to US$ 1,413.0 million or 9 per cent of GDP for 2013, from a deficit of US$ 1,729.0 million or 13 per cent of GDP for 2012. This improvement was reflected in all subaccounts, particularly the trade balance, due to a sharp decline in imports. (Economic Survey of the Caribbean 2014)