IMF predicts strong rebound for Jamaica’s economy
The International Monetary Fund (IMF) is projecting that Jamaica’s economy will rebound from the fallout caused by the novel coronavirus (COVID-19) pandemic to record growth of 8.25 per cent for the fiscal year 2021/22, moderating to 3.5 per cent in 2022/23.
In a statement on Wednesday, November 17, following an IMF 2021 Staff Article IV Mission Consultation for Jamaica, the Fund indicated that the availability of pre-COVID-19 buffers built up by the government, coupled with the calibrated policy response through an ambitious reform programme and strengthened oversight of the financial system, ensured the pandemic-related shock was not followed by a fiscal, financial, or balance of payment crisis.
“Tourism has rebounded to near 70 per cent of the pre-crisis levels, despite two COVID-19 waves this year, and the other sectors have picked up as well. Real GDP in [the second quarter of] 2021 was 14.2 per cent higher than the same quarter a year earlier,” the IMF statement indicated.
The Fund noted, however, that the pandemic poses the most significant risk to the projections.
It pointed out that the third COVID-19 wave is abating and the government's vaccination programme has “picked up pace”, with one million people having now received at least one dose.
“But new COVID-19 waves in Jamaica or abroad could lead to a more prolonged disruption of tourism, trade, and capital flows,” the IMF stated, adding that “another risk is posed by the uncertain duration of global inflationary pressures.”
Other notable factors highlighted include the sharp rise in global food and energy prices that contributed to spiking year-on-year inflation to 8.2 per cent in September which, the Fund pointed out, was well above the Bank of Jamaica’s four to six per cent target range.
The IMF further indicated that natural disasters “continue to be an ever-present risk.”
“On the other hand, a faster pace of vaccinations at home and abatement of the pandemic in Jamaica’s main tourism markets are the upside risks,” the entity stated.
The IMF emphasised that as the pandemic recedes and recovery advances, Jamaica should restart debt reduction and rebuild buffers, given the country’s high susceptibility to external shocks and risks to debt sustainability.
“Policies should also focus on boosting growth, which has been low in the last decades, enhancing institutions, and tackling the still high levels of poverty and crime,” the Fund added.
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