Country Report Jamaica October 2009

Outlook for 2010-11

• The prime minister, Bruce Golding of the Jamaica Labour Party (JLP), will face an increasingly precarious economic and social balance during the forecast period as his government formally returns to the IMF.
• The IMF agreement will require the government to focus on fiscal austerity measures in an attempt to contain growth of the country's massive debt burden, which will rise to over 135% of GDP during the forecast period.
• After the steepest recession in the Caribbean in 2009, Jamaican GDP growth will be lacklustre in 2010-11, as a combination of continuing dependence on the US and internal structural weaknesses prevent a firmer rebound.
• Inflationary pressures will rise during the outlook period owing to a resurgence of global commodity prices.
• The current-account deficit will widen modestly in 2010 as import spending recovers in line with rising global energy prices. Although remaining large, the deficit will narrow to 15% of GDP in 2011.

Monthly review

• In late September the government was forced to take the unpopular position of proposing public-sector job cuts amid a deepening fiscal crisis.
• Despite the government's recent pledge to slash government spending by as much as 20%, the supplementary budget estimates presented on September 30th included a net expenditure increase of J$6.4bn (US$72.7m).
• Although the government revised its budget deficit target to 8.7% of GDP (from 5.5% previously), its revenue projections were highly optimistic considering its official forecast of a continued recession in the remainder of the period.
• According to official data from the Statistical Institute of Jamaica (Statin), real GDP contracted by 3.7% in the second quarter of 2009. As yet, there are no signs of a recovery in Jamaica's economic performance.
• Annual consumer price inflation continued to moderate in August, falling to 6.1% (from 6.9% in July), as monthly inflation rose by its lowest level since April (0.4%).
• The construction of a major new cruise ship terminal in Trelawny, located on Jamaica's northern coast, will proceed after financing was secured in September.
• The trade deficit narrowed by 41.6% year on year, to US$1.7bn (14.1% of GDP), in the first half of 2009 as import spending fell by 47%, more than offsetting a reduction of nearly 57% in export earnings.

This report covers the following industry codes:
SIC Code: 49;70
NAICS Code: 22;72