Impact of Crisis on Jamaica: indicators and monitoring
Notes on the Impact of the Global Crisis on Jamaica
Prepared for UNDP, Kingston
Michael Witter
10/04/2009
I.Indicators of the Impact of the Global Crisis
Table 1: Indicators of the Impact of the Global Crisis on Jamaica
Indicator / Change / DateGDP growth rate- 2008 / Estimated to be -0.4% in 2008 / PIOJ, February 2009
Projected GDP growth - 2009
Job Losses / As of April 2009
Sugar / 7072
Bananas / 600
Bauxite/Alumina / 1250+
Other / 3000+
Tourism /
- Original forecast for 2009 was 13% growth of visitor arrivals
- Revised forecast for 2009 is 2%, with decline in average expenditure per visitor
Remittances /
- Growth rate in 2007/8 was 8-9%
- Growth rate forecast for 2008-9 is 4-5%
Fiscal deficit /
- fiscal deficit has been fluctuating around an increasing (negative) trend since 2000/1;
- the forecast for 2008/9 is 7.4% of GDP, marginally below the high point of 7.5% in 1997/8
Interest rates movements /
- 180-day Treasury bill - 24.26 %
- BOJ reverse repurchase rates on 180-day - 21.5 %
- BOJ reverse repurchase rates on 365-day – 22.67 %
Exchange rate movements / 25% depreciation between September 15, 2008 and February 19, 2009
Ratings by International Agencies
Standard and Poor’s /
- long-term foreign and local currency sovereign credit ratings reduced from 'B' to 'B-'
- short term debt lowered from 'B' to 'C'
- transfer and convertibility assessment lowered to 'B+' from 'BB-'
Moody’s / foreign and local currency government bond ratings to B2 from B1 and Ba2 / March 2009
Trading on the Stock Exchange / lowest volumes traded in five years / February 2009
Table 1 presents some basic indicators of the intensifying impact of the global crisis on the performance of the economy and the fiscal accounts of the government. They point to:
- economic contraction as measured by the negative growth of the GDP and the subsequent job losses as businesses cut-back in the face of declining markets. The most severe cuts have been in bauxite/alumina and export agriculture – sugar and bananas. Inflows from tourism and remittances, the main sources of foreign exchange inflows are already in sharp decline
- rapid weakening of the Jamaican dollar between September 2008 and February 2009 by 25%. The BoJ raised the interest rates to check the speculation. There is debate as to how effective this method is. The rate of depreciation of the currency has slowed, but this has been attributed to consultations with the largest buyers and special arrangements for some, like Petrojam. The business community has been agitating for reduction in the interest rates. The BoJ has responded with a marginal decline in the repo rate.
- Declining confidence in the economy. In light of the deteriorating performance of the economy and the failure of the government to contain the fiscal deficit within programmed levels, the international rating agencies have downgraded Jamaica to the level just above the risk of default on the national debt
The estimates of expenditure as presented to the House of Representatives to open the budget debate of 2009/10 project 56% of recurrent expenditure allocated to interest payments, a freeze on public sector wages, and attempts to maintain the relative shares of expenditure on education and health of a budget that will have lower expenditure in real terms than the budget of the previous year, 2008/9. Further, there has been no provision for major public sector enterprises, such as Air Jamaica and the Sugar Estates. Apparently, the assumption is that these will be divested. Nor has there been any provision for shocks such as the damage from extreme weather events which have hit Jamaica almost every year in the last decade.
Access to international capital markets for loans is now extremely difficult, given the tightness of the markets and the low credit rating of Jamaica. On the other hand, there may be increased access to IMF funding.
The risks to the government and the private sector of previous years have been intensified in the context of the global crisis. Financial flows are not as predictable and appear to be more volatile. Guaranteed markets for exports have disappeared and other traditional markets, such as bauxite/alumina, are weak.
Unemployment is rising, particularly in areas that depend directly and indirectly on the traditional export industries, sugar, bananas, bauxite/alumina, and tourism, and remittances that have helped many families to cope are at best not growing as fast as in recent years. While the number of layoffs from the export industries and the big companies producing for the domestic market are published, the contraction of the myriad of small enterprises that depend on the incomes paid by the big companies is not known. Accordingly, in addition to the traditional pockets of unemployment and poverty, there will be new pockets in the communities that have traditionally benefited from the export industries. If government support for safety net programmes has to be cut, the most vulnerable sections of the population will be further exposed.
II.Monitoring the Impact of the crisis
The conventional indicators of the performance of the economy are:
Indicator / Source / FrequencyCPI (consumer price index) / STATIN / monthly
Exchange rate / BoJ / daily
Interest rate / BoJ / daily
International oil prices / BoJ, Petrojam / weekly
unemployment / STATIN / Quarterly?
GDP / PIOJ / quarterly
Fiscal expenditure, revenue, balance / Ministry of Finance and the Public service / monthly
Balance of payments / BoJ / Quarterly
Poverty rate / PIOJ / annually
In addition to these, real time monitoring of the impact of the crisis will benefit from:
Safety Net
- Monthly reports on applications to PATH, and bimonthly reports on benefits paid
- Monthly reports on applications for assistance to Parish Councils, especially those that are in areas affected by the cutbacks in bauxite/alumina and sugar
Prices
- Weekly, but at least monthly, monitoring of a basket of selected basic foods. The Ministry of Health already does this on a quarterly basis
Cost of Living
- Monthly reports on arrears in mortgage payments from the NHT, and the Building societies
- Monthly reports on foreclosures on houses, and auctions held on cars and houses seized by financial institutions
- Monthly reports on arrears on loan repayments from credit unions
Unemployed workers
- Monthly reports from the PSOJ, the JMA and the JC of C on layoffs reported by their membership
- Quarterly surveys of laid-off workers
- Quarterly surveys of Trade Union officers on developments in the labour market
Children
- Monthly reports on children seen at Bustamante hospital and selected clinics, especially in the areas affected by cutbacks in bauxite/alumina and sugar, who are diagnosed with malnutrition
- Quarterly surveys of primary school children and teachers, especially those who are in areas affected by the cutbacks in bauxite/alumina and sugar, to determine levels of nutrition
- Quarterly surveys of children in selected basic schools for nutritional intake
Mothers and Senior citizens
- Monthly reports on pregnant and lactating mothers and senior citizens seen at selected clinics, especially in the areas affected by cutbacks in bauxite/alumina and sugar, who are diagnosed with malnutrition
Other
- Monthly reports on robbery and fraud from the Police
- Monthly reports on persons seen at Ward 21 at UWI and Bellevue Hospital for depression related to loss of employment and/or other economic challenges
Monitoring is probably best done under the aegis of the Prime Minister’s office acting through the PIOJ, with support from a team of at least two persons responsible for collation of data and completing report templates designed by the PIOJ in collaboration with the UNDP. Data on the non-traditional indicators proposed above will have to be secured through special arrangements facilitated by the Prime Minister’s office and the relevant public sector agencies.
Surveys will have to be contracted out to teams with the relevant expertise.
Michael WitterPage 1