IMF Executive Board Concludes 2021 Article IV Consultation with Jamaica
IMF News, February 15, 2022
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- Published: February 15, 2022
Overview and recent macroeconomic performance
- In the decade preceding the pandemic, Jamaica improved macroeconomic and financial stability:
- Fiscal deficit reduced from 11 percent of GDP in 2009 to a surplus (no year specified for the surplus in the source).
- Public debt fell from 142 percent of GDP to 94 percent in 2019.
- Inflation and the current account deficit declined.
- An early lockdown in Spring of 2020 contained Covid-19 cases but the economy contracted sharply:
- Real GDP shrank by 10 percent (source text: "real GDP shrinking by 10 percent").
- The fiscal response and pandemic effects produced a fiscal deficit of 3.1 percent of GDP in FY2020/21.
COVID-19 response and fiscal/monetary actions
- Authorities’ measures:
- Suspended the fiscal rule for a year.
- Implemented public health measures and a fiscal package to support jobs and protect vulnerable populations.
- Monetary policy:
- Monetary accommodation played an important role during the pandemic.
- Authorities signaled readiness to tighten monetary policy in light of inflationary pressures.
- Planned roll-out of a central bank digital currency with appropriate safeguards as part of the financial inclusion strategy.
Economic outlook and risks
- Growth projections:
- Real GDP is projected to grow at 4.7 percent in 2021 and 4.3 percent in 2022.
- Main risks to the outlook:
- Covid-19 (renewed waves in Jamaica or abroad) that could prolong disruptions to tourism, trade, and capital flows.
- Uncertain duration of global inflationary pressures, which have boosted inflation to well above the central bank’s target range of 4-6 percent.
- Natural disasters remain an ever-present risk.
Executive Board assessment — findings and policy recommendations
- Near-term priorities:
- Protect lives and livelihoods while preserving macroeconomic stability.
- Medium-term priorities:
- Rebuild buffers, safeguard debt sustainability, and prioritize structural reforms to reduce poverty and boost potential and inclusive growth.
- Fiscal policy guidance:
- Once the pandemic recedes, resume growth-friendly fiscal consolidation and put public debt on a downward trajectory toward the authorities’ medium-term target.
- Improve revenue and prioritize expenditures to create space for health, education, infrastructure, and growth-enhancing investment, including for climate resilience.
- Enhance spending efficiency and contain the wage bill.
- The newly established independent fiscal council would help strengthen fiscal institutions and safeguard the credibility of the debt anchor.
- Monetary and financial sector guidance:
- Welcome authorities’ readiness to tighten monetary policy to firmly anchor inflation expectations and bring inflation to within the central bank’s target range by end-2022.
- Strengthen group-wide supervision of financial conglomerates by adopting the remaining legislation and improving data collection.
- Strengthen the AML/CFT framework and swiftly implement the action plan agreed with the Financial Action Task Force.
- Structural reforms:
- Address supply-side constraints through well-prioritized reforms to boost competitiveness and resilience, including digital transformation.
- Strengthen education and training, upgrade infrastructure, reduce crime, and build resilience and adaptation to natural disasters.
Selected economic indicators (2019–2023) — key statistics from the release
- Population (2019): 2.73 million
- Per capita GDP (2019): US$5729
- Quota (current; millions SDRs/% of total): 382.9/0.08%
- Literacy rate (2015)/Poverty rate (2017): 87%/12.6%
- Main products and exports: Alumina, tourism, chemicals, mineral fuels, bauxite
- Unemployment rate (Jan. 2020): 7.3%
- Key export markets: U.S., U.K., Canada
- Real GDP growth (%):
- 2019/20: -0.1
- 2020/21 Est.: -11.1
- 2021/22 Proj.: 8.2
- 2022/23 Proj.: 3.5
- Unemployment (%) 1/: 7.3 (2019/20); note: "..." for 2020/21 in source
- Inflation, end of period (%):
- 2019/20: 4.8
- 2020/21 Est.: 5.2
- 2021/22 Proj.: 6.3
- Inflation, average (%):
- 2019/20: 4.6
- 2020/21 Est.: 5.0
- 2021/22 Proj.: 6.7
- 2022/23 Proj.: 7.2
- Central government finances 2/ (percent of GDP):
- Budgetary revenue:
- 2019/20: 30.6
- 2020/21 Est.: 29.1
- 2021/22 Proj.: 30.5
- Budgetary expenditure:
- 2019/20: 29.7
- 2020/21 Est.: 32.2
- 2021/22 Proj.: 30.2
- 2022/23 Proj.: 28.8
- Budget balance:
- 2019/20: 0.9
- 2020/21 Est.: -3.1
- 2021/22 Proj.: 0.3
- Of which: central government primary balance:
- 2019/20: 7.1
- 2020/21 Est.: 5.9
- 2021/22 Proj.: 5.4
- Public entities balance (% of GDP):
- 2019/20: 0.1
- 2020/21 Est.: -0.5
- 2021/22 Proj.: 0.0
- Public sector balance (% of GDP):
- 2019/20: 1.0
- 2020/21 Est.: -3.5
- Public debt (% of GDP) 3/:
- 2019/20: 94.3
- 2020/21 Est.: 108.1
- 2021/22 Proj.: 91.6
- 2022/23 Proj.: 84.7
- Money and credit:
- Broad money (% change):
- 2019/20: 54.8
- 2020/21 Est.: 63.9
- 2021/22 Proj.: 64.5
- Credit to the private sector (% change):
- 2019/20: 43.9
- 2020/21 Est.: 49.4
- 2021/22 Proj.: 51.2
- 2022/23 Proj.: 50.6
- Treasury bill rate, end-of-period (%):
- 2019/20: 1.8
- 2020/21 Est.: 0.8
- Treasury bill rate, average (%):
- 2019/20: 1.3
- Balance of payments:
- Current account (% of GDP):
- 2019/20: -2.2
- 2020/21 Est.: -1.1
- 2021/22 Proj.: 1.1
- 2022/23 Proj.: -2.3
- FDI, net (% of GDP):
- 2019/20: 1.4
- 2020/21 Est.: 2.7
- 2021/22 Proj.: 3.0
- Gross international reserves (weeks of imports):
- 2019/20: 5.5
- 2020/21 Est.: 8.5
- 2021/22 Proj.: 8.9
- 2022/23 Proj.: 8.7
- External debt (% of GDP):
- 2019/20: 57.6
- 2020/21 Est.: 71.0
- 2021/22 Proj.: 58.5
- 2022/23 Proj.: 54.3
- Exchange rate:
- End-of-period REER (appreciation +) (INS): -5.0 (2019/20)
Press Release No. 22/40 — IMF Communications Department, February 15, 2022.