The latest report from the Planning Institute of Jamaica (PIOJ) shows the economy contracting by 0.6% for the July-September quarter year-on-year. A further contraction of between 0.5%-1.5% year-on-year is now forecast for October-December. Confidence is lacking, and is unlikely to return until the government reaches a new agreement with the International Monetary Fund (IMF).
In the goods-producing sector of the economy, the performance was bad across the spectrum but particularly so in Mining & Quarrying, which recorded a 10.4% year-on-year decline. Total bauxite production was down by 7.7%. Even Agriculture, Forestry & Fishing, which has shown good growth all through the year, advancing by 9.5% in the April-June quarter, contracted by 0.5% in July-September due to drought conditions in June and July. The Services Industry was better, showing zero growth for the quarter.
The slightly better news was that the fiscal deficit for the July-September quarter was J$3.6bn (US$39.5m) below the budgeted figure at J$21.7bn (US$2.38bn), despite the worse than expected economic performance. Revenue was down, of course, bringing in J$7.2bn (US$79m) less than budget, but expenditure was J$10.8bn(US$118m) below budget as well. Total revenue of J$80.9bn (US$888m) was well down on the J$102.6bn(US$1.12bn) collected in July-September 2011.
The trade deficit, however, has worsened. For January-July 2012 it was US$2.76bn, which was US$27.6m worse than in the same period in 2011. Imports were up 0.05% and exports were down 2.7%. Remittances were up 2.5% for January-August, at US$1.36bn, but they fell during July-August by 1.8% on the same period last year.
On the employment front, although the labour force grew by 11,100, the unemployment rate was up from 12.3% in July 2011 to 12.8% in July 2012.
The PIOJ describes the prospects for the economy in the short-term as “challenging”, but it says these challenges could be partially mitigated by the boost to consumer and business confidence that would come with the completion of an agreement with the IMF. But therein lies a tale.
On 20 November, Jamaica’s Finance Minister Peter Phillips told parliament that an agreement with the IMF would be in place by the year end and that the talks on acquiring balance of payments support were going according to schedule. The opposition responded by saying this could not be so – and were very quickly proved right. The next day, the minister responsible for information, Senator Sandrea Falconer, told a press conference that a deal was unlikely to be in place by the end of the year, although it should be completed in January.
The last IMF visit to Jamaica was from 25 September – 5 October. It reported “significant progress” that could underpin a Letter of Intent and Memorandum of Economic and Fiscal Policies. And “mutual understandings” were said to have been reached on “elements” of a growth agenda, “some” structural reforms, and a “preliminary timetable” for implementation. The message behind this was that there was still some hard-bargaining to do, and it seems that this does indeed remain the case.
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