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An aerial view of New Kingston, Jamaica. (Photo: wikicommons)

Jamaica’s economy contracted by 18% in April–June 2020 — PIOJ

An aerial view of New Kingston, Jamaica. (Photo: wikicommons)

The Planning Institute of Jamaica (PIOJ) yesterday, September 9, 2020, at a virtual press briefing, reported that Jamaica’s economy “contracted by an estimated 18.0 per cent in the April to June 2020 quarter compared with the corresponding quarter of 2019”.

According to the PIOJ’s Review of Economic Performance April–June 2020 — details of which PIOJ Director General Dr Wayne Henry outlined during the briefing — the downturn in economic activity for the period under review reflects, to a large extent, the impact of Government-implemented measures to manage the spread of the coronavirus (COVID-19) pandemic.

Director General of the Planning Institute of Jamaica Dr Wayne Henry (Photo: JIS)

The measures included the closure of Jamaica’s international borders to tourists, closure of schools and the execution of stay-at-home/work-from-home orders, the enactment of curfews, and the implementation of physical distancing in public spaces.

Henry noted that the impact of the measures would have “dampened the demand for goods and services” and limit recreational and entertainment activities, thus negatively impacting restaurants.

Notwithstanding, the PIOJ director general pointed out that the negative growth was consistent with trends in other economies, including Jamaica’s trading partners and Caricom counterparts.

“Globally, similar negative outturns were recorded for many countries as a result of the impact of COVID-19 and the measures implemented to curtail the spread of the virus. An examination of the economic performance in some of Jamaica’s trading partners revealed that the economies of the USA, Canada and the United Kingdom recorded contractions of 9.6 per cent, 13.0 per cent and 21.7 per cent respectively, during the review quarter compared with the similar quarter of 2019,” Henry said.

Industry-specific analysis

Overall, the goods-producing sector shrank by approximately seven per cent, according to the PIOJ Review of Economic Performance April–June 2020, with the mining and quarrying industry suffering the most adverse impact.

Contracting by 25.2 per cent, the decline in the mining and quarrying sector continues to experience negative growth due to the closure of the Jiquan-Alpart Alumina Refinery in St Elizabeth, rather than because of COVID-19.

A section of the JISCO-Alpart bauxite plant and alumina refinery in St Elizabeth, Jamaica (File photo)

At the same time, the agriculture industry recorded an 8.5 per cent falloff in production as there was a “lower level of output” Jamaica’s traditional export crops — sugar cane (-20.3), banana (-6.9), coffee (-40.9), and cocoa (-43.7).

“Sugar cane production was impacted by the non-operation of a major sugar factory and logistical challenges faced by farmers to transport the cane to other factories,” Henry explained.

Appleton Estate in St Elizabeth, Jamaica (File photo)

On the other hand, the closure of hotels and reduction in tourism-related activities weakened demand for coffee and cocoa products, the review added.

The manufacturing and construction industries, meanwhile, experienced the smallest declines of 2.9 per cent and 3.0 per cent, respectively.

Developments in the services industry

Without a doubt, the downturn in tourism activity was the most significant contributor to the 20.6 per cent dip in the services sector.

The hotels and restaurants industry recorded a 87.5 per cent contraction, “reflecting a sharp decline in visitor arrivals and the number of
persons utilising restaurant services.

A view of the Sandals Ochi poolside area (File photo)

“This led to a significant fall-off in stop-over arrivals by 98.9 per cent to 7,188 visitors,” Henry pointed out further, adding that visitor spending fell dropped to US$16.2 million, or by 98.1 per cent, for the April–June 2020 period.

While the electricity and water supply industry and finance and insurance industry also contracted — 8.8 per cent and 3.0 respectively — they fared better than others sectors in the services category.

Head office of the Jamaica Public Service Company in New Kingston. (File photo)

Also taking heavy hits during the reference period were transport, storage and communication, which fell short by 29.6 per cent, and wholesale and retail trade, which lost 20 per cent in productivity year over year.

In terms of projections for FY2021/22 , the director general said the PIOJ anticipates a return of growth in output during the period as the Alpart refinery reopens and with the impact of the COVID-19 pandemic on economic activities reducing overtime.

Nevertheless, Henry said he cautiously expects GDP levels will recover around two years after the pandemic.