Country Report Jamaica March 2009

Summary

A severe economic downturn will further restrict the governing Jamaica Labour Party (JLP) in tackling crime and addressing poverty.
Jamaicas massive public debt burden will inhibit any further fiscal expansion. The fiscal deficit will widen as sharply weakening economic activity constrains revenue growth and debt-servicing costs rise.
The recession will deepen in 2009 as household consumption declines and a severe global downturn curbs export demand. After a 3.8% decline in 2009, the Economist Intelligence Unit expects only 0.8% real GDP growth in 2010.
Inflation will fall to single digits in 2009, as import prices and consumer demand weaken, but will return to above 10% as the economy partially recovers.
The current-account deficit will remain large in the forecast period, but will narrow in 2009 as import spending contracts owing to falling private consumption.

The deputy police commissioner announced substantial increases in theft, which he attributed to increasing poverty. Rising crime will damage the credibility of the prime minister, Bruce Golding, as an anti-crime leader.
Public finances continued their poor performance from the fourth quarter of 2008. With revenue shortfalls outpacing expenditure cuts, the year-end deficit is expected to surpass 6% of GDP.
Unofficial GDP data show that Jamaica's economic contraction grew more severe in the fourth quarter of 2008, declining by 0.7% year on year. As a result, GDP for 2008 contracted by 0.4%
Two Jamaican alumina producers, Alpart and Windalco, have announced deep production cuts as their parent company, Rusal, struggles to service its debts. Total production cuts were an estimated 1.75m tonnes in 2009.
The consumer price index fell by 0.3% month on month in January 2009, reflecting falling prices in energy-dependent products.
The Jamaican dollar declined only by 2.6% against the US dollar in February, moderating a steep decline that began in October 2008. The government sold US$163m to defend the currency, bringing reserves to US$1.6bn.
Scotiabank, Jamaica's second-largest bank, reported a healthy J$2.43bn profit for the fourth quarter of 2008, but also an increase in the non-performing loans (NPLs) ratio to 4% from 1.8% a year ago.

This report covers the following industry codes:
SIC Code: 70;60
NAICS Code: 72;52