SPECIAL REPORT ON A COUNTRY WITH AFRICAN ROOTS
Constitutional Monarchy of JAMAICA : Economic Perspectives
The Jamaican economy is an Upper middle-income economy which has been experiencing since 2019 low growth, high public debt and exposure to external shocks.
The combined effects of the global pandemic crisis and flooding caused by tropical storms led to a contraction of 10.2% of the country’s GDP.
Tourism revenues which account for 56.7% of total exports have been obviously impacted by travel restrictions and the Agricultural sector has suffered from declining demand from hotels and restaurants and mostly from damage caused by flooding.
Household consumption (representing ¾ of GDP) fell sharply in 2020 because of the drop in activity and the rise in unemployment.
However, the IMF expects GDP growth to rebound by 1.5%, reaching 5.7% in 2022.
- The Agricultural sector only accounts for 6% of the country’s GDP but employs up to 15.7% of the workforce. The major crops are Coffee, Cassava, Fruits and Nuts.
- The Secondary Sector contributes to 3% of GDP and barely employs 16.2% of the working population. The main activities are Aluminum Oxide which represents 52% of exports and Refined Petroleum (14.2%).
- The Tertiary Sector contributes to 3% of GDP and employs more than 68% of the total working population.
Jamaica’s unemployment rate hit 12% in 2020 amid the Covid-19 after falling to an all-time low of 7% in 2019. The country increased the living conditions have in terms of access to basic services, education and health care. With an estimated GDP per Capita of USD 10,193 in 2019, only 12.6% of its population lives below the poverty line (lowest rate in 10 years).
On a Demographic point on view, more than 50% of the population live in the Capital Kingston. 62.5% of the population are Evangelic, 2.6% Catholic, 14.2% have traditional beliefs and 20.9% are atheists. Density is at 271 inhabitants per Km², and literacy rate barely reaches 90% of the population.
On a Political point on view, Prime Minister Andrew Holness’s center-left Jamaican Labor Party is still popular, but the party faces the difficult task to maintain fiscal discipline and debt payment while controlling crime and drug trafficking. Drug trafficking costs Jamaica almost 3% of its GDP (UN)
On an Economical point of view, the IMF expects Jamaica’s gross debt (at 105.6% of GDP in 2020) to decrease to 96.5% of GDP in 2021 and 84.8% in 2022.
Declining revenues and increasing spending resulted in a budget deficit of 3% in 2020, even Jamaica recorded budget surpluses in recent years.
In 2020, inflation rebounded to 5.2% (from 3.9% in 2019) and is expected to stabilize around 5% in future years.
Jamaica became one of the slowest growing developing countries in the world over the three-past decade : the real GDP per capita has only grown by 1% per year.
Jamaica’s largest trading partner is the United States which is also the largest lender and the primary source of diaspora remittances with more than 500,000 people of Jamaican origin living in the USA.
The Jamaican economy is diverse, but industries lack investment and modernization. The country continues to derive most of its foreign exchange from tourism, remittances, bauxite and aluminum.
The Bank of Jamaica (BOJ)
Over the past decade, the Jamaican Dollar remain quite stable with an average annual exchange rate only varying by 1% or 2% against the USD.
The table below shows us the domestic loan rates from January 2020 to May 2021 : personal credit represents the higher rates, but the overall A/W rate has been maintaining between 11% and 12%, reflexing the objective of the BOJ to stabilize local economy.
Focus on Exports and Imports
In 2019, Jamaica was the number 119th economy in the world in terms of GDP (current US$), the 140th exporter in the world and 128th importer in the world. The country exported USD 1.85 Billion and imported USD 5.91 Billion, resulting in a negative trade balance of USD 4.06 Billion.
The top exports of Jamaica are Aluminium Oxide ($966M), Refined Petroleum ($263M), Aluminium Ore ($89.5M), Hard Liquor ($86.7M) and Other Processed Fruits and Nuts ($49.4M).
Jamaica exports mostly to United States ($594M), Netherlands ($201M), Germany ($173M), Canada ($134M), and Iceland ($120M).
The top imports are Refined Petroleum ($836M), Cars ($332M), Crude Petroleum ($238M), Petroleum Gas ($195M) and Packaged Medicaments ($103M).
It imports mostly from United States ($2.56B), China ($630M), Japan ($260M), Trinidad and Tobago ($166M) and Turkey ($164M).