Wednesday 30 September, 2020

Jamaican economy contracts by 18 per cent in June quarter

The Planning Institute of Jamaica (PIOJ) has reported that real Gross Domestic Product (GDP) for the Jamaican economy contracted by an estimated 18 per cent in the April to June 2020 quarter compared with the corresponding quarter of 2019.

Dr Wayne Henry, PIOJ Director General, the outturn for the April to June 2020 period largely reflected the impact of the implementation of measures to manage the COVID-19 pandemic commencing in mid-March.

These included the closure of international borders to passenger movements, which curtailed external demand and essentially halted all tourist-related activities. The implementation of curfews which restricted people movement opening hours of businesses also adversely impacted the demand.

Henry also noted that the PIOJ’s  estimates during January to March 2020 that the economy contracted by  1.7 per cent, was followed by a subsequent estimate from the Statistical Institute  a contraction of  2.3 per  cent, a variation of 0.6 percentage point from PIOJ’s initial estimate.

For the June quarter, Henry stated that economic contraction was also due to implementation of physical/social distancing measures, which restricted congregation of persons in one location, thus negatively impacted recreational/entertainment and restaurant activities.

Meanwhile, the closure of all schools and the implementation of general stay at home and work-from-home orders further dampened the demand for goods and services.

The Director General also cited lower capacity utilisation within the Mining and Quarrying industry, following the temporary closure of Jamaica’s largest alumina refinery in September 2019 to upgrade productive capacity.

Dr Wayne Henry, PIOJ Director General

He also noted a continued slow-down in construction related activities consequent on the ending of major road infrastructure projects, the slow start-up of new projects, as well as a downturn in building construction activities.

Further, the PIOJ head cited weakened business and consumer confidence associated with uncertainties regarding the duration and impact of the pandemic and weakened demand associated with lower income due to job losses and reduced work hours.

Henry said that 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, conditions also affecting Jamaica’s trading partners.

The economies of the US, Canada and the UK 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.

The PIOJ said that for the upcoming quarter, July to September 2020, it is projected that the economy will continue to contract, within a range of eight to 10 per cent.

It said the lower rate of contraction is due to the lifting or relaxation of some of the restrictions previously implemented. The borders have been re-opened to passenger movements to facilitate the resumption of activities in the Hotels and Restaurants industry.

It added that it is unlikely that the economy will record growth for the remainder of this fiscal year. The current projection is that the e per cent for Fiscal Year 2020/21.

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