THE Jamaican dollar won’t slide much in 2011 but the ‘lacklustre’ economy will, according to a United Nations report released this month.

The exchange rate will dip in line with US inflation losing at worst three per cent or about J$2.50 to close at J$88.09/US$1, according to analysis by the Economic Commission for Latin America and the Caribbean (ECLAC), which is one of five regional commissions of the United Nations Economic and Social Council.

The forecast follows an appreciation to around J$85 to US$1 in the months leading up to October, reflecting, according to ECLAC, an improvement in the current account, policy interventions and improved investor confidence. The exchange rate is expected to stabilise given the confidence springing from the International Monetary Fund (IMF) programme, the report said.

“At worst, with the increase in imports and other sources of currency demand, the currency could sustain a modest nominal depreciation to stand at J$87.06 to US$1 by the end of 2010 and J$88.09 to US$1 by the end of 2011,” stated ECLAC in its chapter on Jamaica for the publication entitled Preliminary Overview of the Economies of Latin America and the Caribbean 2010 .

The reggae island, however, will grow this year between negative 0.5 and 0.5 per cent, compared with average regional growth of six per cent, according to ECLAC, which tracks regional growth as an indicator of development.

“Despite substantial inflows under a 27-month stand-by agreement with the IMF, Jamaica’s economic performance will remain lacklustre in fiscal year 2010/2011,” added ECLAC.

The countries with the highest regional growth over 2010 and 2011 respectively include:

* Paraguay 9.7 and 4.0 per cent;

* Uraguay 9.0 and 5.0 per cent;

* Peru at 8.6 and 6.0 per cent;

* Argentina at 8.4 and 4.8 per cent;

* Brazil at 7.7 and 4.6 per cent; and

* Dominica Republic at 7.0 and 5.0 per cent

The outlook for the local tourism sector remains flat but it’s worse for the goods sector, which includes bauxite and alumina.

“The tourism sector, an important source of employment and foreign exchange, will fare better than the goods-producing sectors in 2010/2011, but it will not return to the robust growth of recent years, owing to weaker demand and delayed investment in new hotels and tourism infrastructure,” the report continued. “For example, there was only a 3.1 per cent increase in stopover visitors and a 1.9 per cent rise in visitor expenditure for the first six months of 2010. Aggregate demand continued to decline, albeit, at a slower rate than in the comparable period of 2009. This performance reflected decreases in private and public consumption spending and gross fixed capital formation, which cancelled out the effect of the improvement in net external demand.”

ECLAC concluded that, going forward, Jamaica’s economy “remains delicate” due to the impact of the global recession but also Tropical Storm Nicole in September.

“While investor sentiment has improved significantly since the approval of the [IMF] agreement, the situation remains delicate given the additional demand generated by Tropical Storm Nicole and the impact of the austerity measures applied to the social sector. Extraordinary expenditure of US$ 80 million for flood damage, recently approved by IMF, will provide much-needed relief, given the extensive damage to infrastructure in various areas of the country,” it stated, adding that the US$1.3- billion IMF agreement signed in February would formalise a commitment to fiscal austerity measures aimed at forestalling any increase in the country’s massive debt burden and enabling the government to avoid default. The passage of a fiscal responsibility law and any future amendments should in time help to reduce the overall public-sector deficit.

The ECLAC report follows the World Economic Outlook published in October by the IMF which ranked Jamaica as having the seventh slowest growth rate in the world up to 2015. It indicated missed opportunities for the debt-ridden country.