Pace of fiscal deficit cut remarkable — World Bank
THE World Bank has lauded Jamaica for slashing the fiscal deficit at the fastest rate in the region last year.
It came within the context of increased fiscal deficits within much of the region.
"In particular, Jamaica saw the largest fiscal improvement in the region going from a deficit of more than four per cent in 2012 to a surplus of 0.1 per cent of GDP in 2013," stated the World Bank in its flagship Global Economic Prospects (GEP) published this week. "Spending restraint, higher tax revenue, and lower interest and amortisation payments on restructured domestic debt, together with assistance from multilaterals supported this remarkable fiscal improvement."
Other countries which reduced deficits included Argentina, Venezuela and Dominica, Dominican Republic and St Lucia.
The fiscal constraints in Jamaica are part of conditionalities under the ensuing International Monetary Fund (IMF) agreement. The island entered the IMF agreement with a fiscal deficit of about six per cent of GDP before slashing it. Comparatively, the regional fiscal deficit widened from 3.6 per cent in 2012 to around four per cent of GDP in 2013.
"For example, Brazil's fiscal deficit increased 0.5 percentage points to 3.3 per cent of GDP in 2013 as the government implemented counter-cyclical measures such as tax breaks and an expansion of public lending to stem the growth slowdown. Similarly, Ecuador saw its fiscal deficit widen by 3.1 percentage points to more than four per cent of GDP on healthcare and education reforms," stated the publication.
The head of the IMF, Christine Lagarde, will lead a delegation to Jamaica at month-end to discuss the ensuing loan agreement ultimately aimed at increasing the island's growth prospects. The GEP, as previously reported, revised upward the growth prospects for Jamaica in the context of a downward revision for the region until 2016. It's uncommon for a global report to actually improve the growth prospect for the cash-strapped island.
Jamaica is now projected to grow at 1.1 per cent in 2014, 1.3 per cent in 2015 and 1.7 per cent in 2016, according to the Global Economic Prospects report. In January, the World Bank projected the island to grow by one per cent, 1.2 per cent and 1.3 per cent, respectively. The Latin America and Caribbean (LAC) on a whole received a one per cent downward revision to 1.9 per cent based on reduced growth prospects in larger economies.
The report's executive summary indicates that developing country growth will not be more robust, in part because most developing economies are already fully recovered from the crisis and growing at close to potential. Moreover, in the medium term, global financial conditions will tighten, stated the report.