Jamaica’s reduced import bill will allow it to withstand any possible loss of the PetroCaribe concessionary oil import arrangement, according to the World Bank Group in its just released Economic Update for the island.

Jamaica’s current account benefited from reduced oil prices down nearly half on last year and currency depreciation which slashed goods imports, according to the document subtitled Jamaica Sustained Adjustment, Fragile Recovery.

“Hence the current forecast of depressed oil prices should at the minimum support a lower current account deficit which would help maintain macroeconomic stability due to lower financing needs. This improvement in the balance of payments could more than offset the loss of balance of payment financing through the PetroCaribe oil financing arrangement with Venezuela,” stated the 13 page document obtained by the Jamaica Observer at the 3rd Regional Caribbean Growth Forum in St Lucia on Monday.

The World Bank indicated that the island’s current account has improved substantially from a deficit of 9.9 per cent of GDP in 2012/13 to roughly 5.3 per cent of GDP in 2014/15. It indicated that the improvement was the result largely from what it termed “import compression”.

“The sharp decline in oil prices has supported this trend, and could contribute to a further improvement in the balance of payment,” it said. The report added that the lower current account deficit and the 23 per cent currency depreciation over two years have contributed to improving the balance of payment position and supporting a buildup in foreign reserves.

Last October an International Monetary Fund (IMF) top representative warned that the Caribbean needs to prepare stress tests that include the halt of the PetroCaribe oil arrangement with Venezuela. Since 2005, Governments across the region entered into the PetroCaribe arrangement, a deferred oil payment deal with oil-producing Venezuela.

Jamaica in recent years spent some US$2 billion on oil imports annually but the deferred oil payments under the PetroCaribe arrangement effectively provide some US$500 million in balance of payment support to Government annually.

Oil prices dipped from US$100 last June to its current price of US$60 a barrel. The oil price drop placed oil producing Venezuela under considerable pressure as government revenues dipped by several billion dollars.

At the same time, the World Bank described the island’s growth as fragile and supported by continued reforms and lower international oil prices.

“Even though real GDP growth was low in 2014/15 the transitory nature of the drought implies that growth could pick up to 1.5 per cent in 2015/16,” stated the report alluding to three months of drought recently faced by the island.

The World Bank expects the private sector to drive growth in Jamaica in 2015 due to fiscal constraints on Government. However it expects the Government to contribute to growth in the medium term.

“As fiscal space is regained more expenditure could be targeted towards capital accumulation, yielding higher growth in the medium to long term. Lower oil prices and the recovery in the US economy will also help Jamaica grow in the medium term,” stated the report.