PIOJ still bullish on Jamaica’s economic recovery
Agency increases its growth forecast from 4-8 per cent to 6-10 per cent for this fiscal year
The Planning Institute of Jamaica (PIOJ) on Tuesday told Parliament’s Public Administration and Appropriations Committee (PAAC) that it has revised upwards its growth outlook for the rest of fiscal 2021/22, from the 4-8 per cent suggested at the start of the year, to 6-10 per cent.
PIOJ Director General Dr Wayne Henry told the committee reviewing the recently tabled First Supplementary Estimate for 2021/22 at Gordon House that it has also accepted the 14.2 per cent economic growth figure for the AprilJune quarter, and is convinced that the outcome at the end of the fiscal year will show the new prediction of 6-10 per cent.
Henry said that the stronger than projected recovery in the economy in April–june was “the largest quarterly increase since Jamaica started measuring quarterly GDP in 1996, and the first increase since JulySeptember 2019”.
According to Henry, this reflected stronger than projected external and local demand.
But he admitted that, despite these positive developments, “risks still remain to the growth forecast that can slow the pace of recovery”.
Opposition Member of Parliament (MP) Lisa Hanna (St Ann South Eastern) questioned the PIOJ boss if he believed that what is projected in the supplementary budget was enough for the goods and supplies needed, plus an increase in the COVID-19 vaccination service delivery:
“Do you believe it is enough to get us where we want to get to?” asked Hanna.
In his response Henry said that, while Ministry of Health and Wellness personnel would be in a better position, the PIOJ has taken note of the events like the increase, in recent times, in terms of the vaccination rate.
“What this pandemic has shown for the global community and the global economy, is that it is characteristic of a certain level of uncertainty manifesting itself in spikes, in COVID rates, return to restricted measures, in terms of people’s movement, etcetera, and just people’s behaviour overall,” said Henry.
He added that just as the PIOJ anticipated, there have been movements and accommodations being made that are flexible, in terms of responding to what it is being experienced, and in terms of the economic conditions.
Henry used as an example, where the Bank of Jamaica (BOJ) had taken a stand to curtail inflation.
“So there is a comfort level in terms of what we are seeing in terms of projections and what we are anticipating. And there is, importantly, that coherence. While we don’t map each other you tend to find the same assessments coming out, and then as we pull together in terms of collaborating in our fiscal policy framework, then that is coherent,” declared Henry.
He said that the 14.2 per cent growth rate for the April–june 2021 quarter should be viewed within the context of the 18.4 per cent decline recorded in April–june 2020, due to the novel coronavirus pandemic and the public health and social measures implemented to stem its spread compared with April-june 2021 when these measures were relaxed globally and locally.
Henry also noted that all industries recorded increases during the period, with the exception of mining and quarrying, which was impacted by production and demand challenges.
He pointed out that the industries with the largest increases were hotels and restaurants, which were up 334.6 per cent, due to increases in both components following the relaxation of containment measures, which included border closure in the corresponding quarter of 2020.
Other services, he said, went up by 23.2 per cent, benefiting from increased tourist-related activities and recreational activities.
In addition, Henry said wholesale and retail trade went up 19.3 per cent following the relaxation of curfew hours, heightened demand and increased output from related industries; and construction was up 17.4 per cent, resulting from increases in building construction and civil engineering, specifically associated with road projects.
He said that the labour market has begun to recover to PRE-COVID–19 levels, and this is evident as there has been a marked improvement in the size of the labour force, an overall decline in unemployment levels, and an uptick in the employed labour force.
This was evidenced by an increase of 84,400 people that are employed, relative to the COVID low in July 2020, which represents a recovery of more than half the employment lost between January 2020 and July 2020.
Henry said that the PIOJ’S growth outlook can be higher or lower, based on various downside risk and upside potential.
He argued that while the risk is skewed towards the downside, given the emergence of new COVID-19 variants and the potential for public health and social measures being re-implemented locally and globally, there are factors will influence growth in the short to medium run.
However, he said that there are risks to the targets including: persistent vaccine hesitancy, that limits the pace of return to normalcy globally and locally; spike in number of COVID-19 cases, which may lead to re-implementation of more restrictive public health and social measures; new variants which are increasingly fatal, significantly impacting human capital and hospitals’ ability to provide care; and weather-related shocks and their negative impact on agriculture, electricity and water.
The PIOJ head further noted that a longer than expected refurbishment time at the Jamalco and JISCO Alpart bauxite refineries could create problems, with Jamalco is expected to be closed for the remainder of the fiscal year.
He added, too, that tightening the monetary policy globally and locally, in response to upward pressure on inflation, leading to a decline in access to liquidity were also threats, while the one percentage point increase in Bank of Jamaica policy rate is not expected to have a significant impact on growth in the medium term.