Less growth for Jamaica — IMF But rates still beat LAC average

News post October 9, 2015

LIMA, Peru — Christrine Lagarde Managing Director of the IMF and Gerry Rice (right), Director of the IMF Communications Department, arrive to a press briefing yesterday, during the day’s activities of the Annual Meetings of the World Bank Group. (PHOTO: AFP)

The International Monetary Fund (IMF) revised downward its growth projection for Jamaica up to 2016, according to the World Economic Outlook (WEO) released this week.

The IMF noted in its quarterly World Economic Outlook (WEO) that the island should grow at 1.1 per cent in 2015 down from 1.7 per cent projected in the previous report. The island should also grow at 2.1 per cent in 2016 down from 2.2 per cent in the previous report.

Despite the downward revision, the island actually beat the regional average growth for Latin America and the Caribbean region (LAC), according to fresh data from the island’s multilateral lender, the International Monetary Fund (IMF).

It is rare, at least in recent years, for the island to beat the region. Commodity prices led by energy and grains are no longer supporting the growth in Brazil, Venezula, Argentina and Mexico. As a result their growth is weak, but it also allows commodity importers like Jamaica a chance to grow.

The LAC regiion is set to grow at negative 0.3 per cent and 0.8 per cent in 2015 and 2016 respectively.

Panama will continue growing at the fastest pace in the Americas at 6.0 per cent and 6.3 per cent in 2015 and 2016 respectively.

Meanwhile, oil-rich Venezuela should decline by 10.0 per cent and 6.0 per cent in 2015 and 2016, the worst in the region.

Jamaica will edge out oil-rich Trinidad & Tobago, set to grow at 1.0 per cent and 1.4 per cent in 2015 and 2016, respectively.

But the Dominican Republic should grow at the fastest pace in the Caribbean at 5.5 and 4.5 per cent over the review period.

The WEO acknowledged that Caribbean countries are running one of the largest deficits due in part to their oil dependence.

“It suggests that these countries do run larger deficits than others, after their size and level of development are controlled for. The intensity of their oil dependence is clearly a factor explaining their deficits,” stated the report.

In the previous WEO it highlighted that government deficits would come under greater pressure, were the PetroCaribe concessionary oil agreement between Venezuela and the Caribbean to end.

The previous WEO also warned against governments stimulating Caribbean economies in an effort to spur growth. It indicated that “misguided efforts to address the current slowdown” with excessive policy stimulus, rather than by tackling supply-side bottlenecks and competitiveness problems, could also undermine countries’ hard-won macroeconomic stability.

Jamaica signed a US$932.3-million four-year Extended Fund Facility (EFF) agreement with the IMF. The programme calls for the reduction of Jamaica’s debt from some 145 per cent of gross domestic product (GDP) to 96 per cent by 2020. It also includes achieving a 7.5 per cent primary budgetary surplus target; implementation of a National Debt Exchange programme; currency depreciation; tax reform; and public sector reform — restructuring of salaries to reduce ratio to GDP from 10.6 per cent to nine per cent by 2015/16.

 

 

Published By: The Observer

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