2.25% growth in medium term says IMF

2.25% growth in medium term says IMF

IMF expects 2.25 per cent GDP growth over medium term

Business reporter

Wednesday, January 08, 2020

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The International Monetary Fund (IMF) is maintaining its prediction for the country to achieve a 2.25 per cent growth to gross domestic product (GDP) within the medium term — a position reiterated following the Statistical Institute's (STATIN) latest report which noted a 0.6 per cent growth for the third quarter of 2019.

IMF resident representative Dr Karim Youssef has expressed that the latest data coming out of STATIN also confirms the views expressed in the last IMF staff report, published in November.

“At this point, IMF staff's baseline expectation for Jamaica's real GDP growth in FY 2019-20 remains at 0.8 per cent for the entire fiscal year, and a resumption towards 2.25 per cent GDP growth over the medium term is still expected,” he told the Jamaica Observer.

“As detailed in the latest IMF Staff Report for the sixth and final review under Jamaica's fund-supported stand-by arrangement (SBA), this outlook already accounts for the temporary effects of supply-side and weather-related shocks in agriculture and separately in mining – due to the temporary Alpart plant closure,” he continued.

Last week STATIN also reported that a 1.0 per cent decline in the goods- producing industries was due to low levels of output in agriculture, forestry & fishery (0.1 per cent); construction (2.1 per cent) and mining and quarrying by 17.6 per cent.

“The agriculture, forestry & fishing industry declined due to dry weather conditions across the island and increased production costs. The performance of the mining & quarrying industry was largely due to the suspension of production in early September at the Jiuquan Iron and Steel Company (JISCO) Alpart refinery. The construction industry was impacted by a fall in the civil engineering subgroup due to a reduction in road rehabilitation works,” STATIN reported.

The IMF resident representative also pointed out that deeper analysis of STATIN's report signals that growth, though minimal, must not be overlooked, as it signifies that the country has started to benefit from macroeconomic stability.

“A slightly deeper delve into the STATIN release highlights that sectoral GDP growth out-turn from April to September 2019—across manufacturing, retail trade, hotels and restaurants, real estate and renting, and finance and insurance— all continue to outstrip [ie higher by a large margin] the historical average growth rates in these important sectors [at this point in the fiscal year]. This should not be overlooked as it points to the fact that Jamaica is benefiting from entrenched macroeconomic stability, and should be expected to continue doing so in the future,” Youssef further told the Business Observer.

He also conceded that sustaining higher growth into the long term will require continued partnerships from all stakeholders, enhanced linkages across the economy—especially among manufacturing, tourism and agriculture. With this said, he emphasised the need for dealing with the structural “constraints to growth including climate resilience—especially important in agriculture—and linkages to help insulate against temporary shocks such as those in mining”.

“Growth underperformance due to supply-side and weather-related shocks in agriculture, and separately in mining, have highlighted the need to move quickly in dealing with structural impediments that stand in the way of higher and more inclusive growth,” he asserted.

Irrespective of the bumps in the road, the IMF has however expressed confidence that the country's commitment to sound economic reforms during the last six and a half years remains impressive.

Minister of Finance Dr Nigel Clarke just last week echoed similar sentiments when he reassured that the country's programme of economic expansion continues, despite external shocks.

He expressed confidence that the country, having experienced 19 consecutive quarters of economic growth, is expected to return to its previous trajectory of economic growth seen prior to the JISCO/Alpart closure.

“The projection is for economic growth for the 2020/21 financial year to return to levels above one per cent. The Government will continue to use all levers at our disposal to elevate levels of growth beyond this across the medium term,” the minister said.

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