COVID-19: Finance minister projects ‘economic shock’
Minister of Finance and the Public Service, Dr Nigel Clarke says Jamaica is in for a negative economic shock.
Commenting on the trajectory of the coronavirus (COVID-19) globally and the start of community spread locally and measures aimed at containing the virus, Clarke said: "We need to be prepared for the worst and be ready for a very significant growth setback."
“Under these circumstances, the sharpness of the economic decline in the first quarter or two could lead to negative growth overall for the 2020/21 financial year, depending on how quickly tourism and other services resume and recommencement of employment generation in the country.”
Presenting his closing budget presentation on Tuesday, Clarke said very tough decision making is required in Jamaica at this time.
Clarke outlined challenges facing the economy.
According to the finance minister, the hotel industry will operate at near-zero occupancy for at least three months.
Some local hotels have already announced that they will close for some time and more will likely follow.
Clarke further noted that with the airport shut for two weeks, visitor arrivals will plummet to zero in the short term and “for the quarter ending June 2020 we may only have a trickle of guests.”
This, he said, means that restaurants, tour operators, attractions, travel agencies will also experience significant and substantial fall in business revenue and some of these may also need to close temporarily.
Clarke noted that many other sectors that participate in the tourism value chain and supply hotels with products will experience steep declines in business.
“Barbers and hairdressers in tourist towns will have less business,” Clarke said.
With bars and entertainment venues closed, producers of alcohol will have less business, the finance minister also said.
“Closure of wholesale operators downtown means less sales for food and other manufacturers. In summary, the curtailment of economic activity will adversely affect many businesses, in ways that are not obvious.”
The Minister of Finance also noted that employment levels “that have been so robust” will be negatively impacted in the period to come.
“We can expect a sharp rise in layoffs in the short term. We are likely to see a decline in quarterly GDP for the quarter ending March 2020 and we can certainly expect a sharp contraction in GDP in the first quarter ending June 2020 over the first quarter of the prior year, ending June 2019,” Clarke stated.
The Minister of Finance said that the timing and pace of recovery will greatly depend on how quickly the United States in particular, but Europe as well, are able to curtail the spread of this virus.
He noted: “Economic decline and recession in the United States is likely and this could compound the COVID-related economic impact…What we do know is that Jamaica is in for a massive negative economic shock, which has already begun".
“This pandemic is nothing like the world has ever experienced before. The conditions around the globe are still evolving and the uncertainties huge,” Clarke said.