A further 1.8 per cent contraction of the local economy during the last quarter of 2024 was not enough to place the country in a recession as other macroeconomic indicators continue to trend positively, Planning Institute of Jamaica (PIOJ) indicated during a quarterly briefing on Wednesday at which time it presented the preliminary estimates of economic performance.

PIOJ Director General Dr Wayne Henry, commenting on arguments floating in the public domain about whether or not the local economy had fallen into a recession, said that given the entity’s technical assessment of important variables spanning depth, diffusion and duration — which are typically used to determine if a recession is taking place — “the Jamaican economy, though facing a downturn in economic output, is not in a recession.

“However there remain significant challenges due to hydrological shocks, reflected largely in the fallout in tourism; electricity and water supply, and agriculture, forestry and fishing,” he stated.

Henry said that with recessions as a general rule of thumb largely defined as being “two consecutive quarters of decline in a country’s seasonally adjusted real GDP”, the primary reason behind the latest quarterly contractions seen mainly stems from adverse outcomes following the passage of Hurricane Beryl in July 2024 and other subsequent hydrological events — including Tropical Storm Rafael in November 2024 — all of which significantly impacted real value added.

Following a larger 3.5 per cent contraction in the previous July-September quarter, the local economy, he said, continued to face fallouts from damage to and loss on productive activities from these weather-related events.

“Given the nature of these shocks it is likely that the impact will be temporary and will be reversed in the near term,” he said while noting that PIOJ, as it continues to monitor and track developments in the economy, will move to make the necessary updates as new data becomes available.

Henry said that, while the economy may have satisfied one of the criteria for a recession (registering two quarters of contraction), other metrics which include, but are not limited to income, employment and fiscal health — as per the views of major international macro-fiscal entities such as International Monetary Fund (IMF) and World Bank — are ranked as equally important and should also be considered.

“Economic analysts have progressively taken a more comprehensive view of a recession, which is that a focus on gross domestic product (GDP) alone is insufficient, and it is often better to consider a wider set of measures of economic activity to determine whether a country is indeed experiencing a recession,” Henry said.

“A recession is usually accompanied by a steady rise in job losses and a significant increase in unemployment,” he continued.

Assessing official data captured by Statistical Institute of Jamaica (Statin) on the country’s unemployment rate — another widely used economic indicator of a recession — he said a different picture has been painted.

“The unemployment rate for October 2024 is 3.5 per cent, and employers have also lamented challenges/shortages in filling some vacant positions. This suggests that, despite the temporary contraction in output, the labour market continues to remain robust and may be considered a lead indicator of a return to growth in the short term. This is also supported by the most recent data on business and consumer confidence levels which indicate positive sentiments by both consumers and businesses regarding current and future economic prospects,” he further noted.

Following large-scale contractions across most major industries, which show agriculture (down 12 per cent), mining and quarry (down 3.2 per cent), construction (down 2.1 per cent), manufacturing (down 0.7 per cent), wholesale and retail trade (down 1.2 per cent), electricity & water supply (down 1.4 per cent), and hotels and restaurant (down 2.5 per cent), PIOJ, in light of these out-turns, regarded the economy as being relatively strong, with growth expected to return in upcoming quarters.

In the usually dominant tourism sector, despite positive contributions flowing from a number of major entertainment events in December, the data presented suggest that this was still not enough to temper a 1.6 per cent decrease in stopover arrivals, reduced visitor expenditure, or even the challenges faced in relation to several issues involving the impacts of negative travel advisories and industrial action taken by workers across some hotels, as well as a fall in airlifts due to supply-side challenges with aerospace and plane-making company Boeing.

As a result of the wholesale contractions, both goods-producing and service industries registered downturns of 4.7 per cent and 0.7 per cent, respectively, with further contraction in output moderately cushioned by higher levels of employment and an increase in business and consumer confidence in light of favourable perceptions about current conditions and the accompanying prospects for expansion in business and job opportunities.

Despite a range of potential downside risks, including new changes in several US policies, the PIOJ head, in sharing a short- to medium-term outlook, said the prospects for the local economy remain generally positive.

“Within this context, economic growth is anticipated for the final quarter of fiscal year 2024/25. For the January to March 2025 quarter, growth is projected to be within the range of 0.1 per cent to 1.0 per cent. However, for financial year 2024/25 the economy is expected to contract within the range of 0.5 per cent to 1.5 per cent,” Henry stated.