PIOJ sticking to growth projection despite possible coronavirus impact
File photo of Planning Institute of Jamaica's (PIOJ) Director General Dr Wayne Henry addressing a press briefing.
Trade and financial flows to the island could be impacted by the global outbreak of the novel coronavirus, according to the Planning Institute of Jamaica (PIOJ).
Director General of the PIOJ, Dr Wayne Henry made the suggestion at the planning institute’s quarterly press briefing in Kingston on Tuesday.
“Given the significant economic ties between Jamaica and China, the possible impact of COVID19 on Jamaica’s economic performance would include, weakened external demand due to a slowing in the Chinese economy and weakened domestic demand associated with a possible slowing in new investments from China,” Henry said.
He further reasoned that weakened investments would impact output and employment levels as well as business and consumer confidence locally.
The virus has infected more than 80,000 people in China and 33 other countries, according to global media reports.
Nevertheless, the PIOJ has estimated real GDP to grow within the range of 0 to one per cent during January to March 2020 vis-à-vis the comparative period of 2019.
The projection follows preliminary estimates for October to December 2019, with real GDP growth of 0.1 per cent compared to the comparative quarter in 2018. This represents 20 consecutive quarters of growth in the economy.
With regard to the period January to March 2020, Henry noted that the institute had taken into account various global risks and weather conditions when outlining the growth estimates.
“We have spoken about downturn risks, while greater downside risks are a possibility, you could have greater upside also. You always looking at possibilities,” Henry told the briefing.
In the meantime, the PIOJ head said it is expected that the impact of the coronavirus will be contained in a more dramatic way.
“You see authorities in many countries doing quite a bit and if those bear even more fruit, then you could easily see where that does not materialise,” Henry said.
He, however, acknowledged: “We know that there will be some impact.”
The PIOJ director general said the possible effect on trade and financial flow would come as a result of travel restrictions to stem the spread of the virus.
With respect to trade, Jamaica’s imports from China include intermediate goods, consumer goods and capital goods, Henry said.
Intermediate goods are inputs that are critical to the local production process in key industries such as construction.
Meanwhile, consumer goods imports from China include final produce such as clothing and appliances. These items drive activities in wholesale and retail trade.
Capital goods include items that are essential for the industrial sectors such as manufacturing, mining and quarrying and construction.
On the export side, eternal demand from china is critical to the performance of the mining and quarrying industry as a major purchaser of Jamaica’s crude bauxite and alumina.
Exporters of non-traditional goods such as scrap metal also benefit from trade with China. Other areas of export with China include seafood and tourism services.
Therefore, “an extended fallout in trade with China, will therefore negatively affect the Jamaican economy particularly through reduced export earnings and weakened production performance within several industries,” Henry said.
With respect to financial flows, China has provided Jamaica with significant loans and grants over the last decade, Henry noted.
These include major loan facilities such as (1) the US$340 million Jamaica Development Infrastructure Programme, which was undertaken during the period 2009 to 2015 and involved the rehabilitation of roads and bridges (2) the US$300 million the Major Infrastructural Development Programme MIDP, for which the main objective was to continue the improvement of the island’s road network and (3) US$326.4 million Southern Coastal Highway Improvement Project, which includes the rehabilitation of roadway from Harbour View to Port Antonio.
Additionally, major foreign direct investments from China include acquisitions in the mining and quarrying and agriculture industries as well as in private construction services.