Question

What are the Problems and Prospects (Past/Present/Future) of Jamaica?

Answer 1

Jamaica is an upper middle-income economy that is nevertheless struggling due to low growth, high public debt and exposure to external shocks. According to the IMF, Jamaica's GDP grew 1% in 2019, against 1.9% in 2018. The economic performance was a consequence of greater foreign demand for Jamaican goods and services, including mining, tourism and gastronomy. According to the updated IMF forecasts from 14th April 2020, due to the outbreak of the COVID-19, GDP growth is expected to fall to -5.6% in 2020 and pick up to 3.5% in 2021, subject to the post-pandemic global economic recovery.

Since 1990, Jamaica’s average real GDP growth rate has been approximately 1 percent per year , well below the 3 percent and 4 percent average s of other Car ibbean member countries of the IDB and the a verage for Latin America and the Caribbean , respectively . Years of high deficits, public enterprise borrowing, financial sector crises and bailouts resulted in rapid debt accumulation that has stifled growth and development . As a result, standards of living , as measured by per capita GDP, have remained stagnant for the past five decades.

The international environment remains favorable for Jamaica. The outlook is based on the continuing strong performance of Jamaica’s major trading partners — the United States, Canada, a nd the United Kingdom — and moderate commodity prices, especially for oil . The outlook is , however, not without risks. The world economy is performing well but faces headwinds, including geopolitical , trade - related, and security issues . Moreover , further monetary tightening in the United States could hamper Jamaica’s access to international finance. Domestically , the positive outlook assumes fiscal prudence , and continued reforms to further reduce debt levels while making the economy more competitive. Fin ally , as a small island economy, Jamaica is vulnerable to climatic shocks, which could be accentuated by climate change. While Jamaica has been spared by major hurricanes in the last few years, natural disasters or other climate - related events affecting the agriculture or tourism sectors could have severe impacts on the economy .

Jamaica remains one of the world’s most indebted countries. With two - thirds of revenues dedicated to interest payments and salaries since the mid - 1990s , infrastructure and social expenditure have been crowded out , reducing economic growth and compromising social outcomes. High public - sector financing needs and increased domestic interest rates have further crowded out domestic credit , with consequences for productivity growth and job creation

Jamaica has a relatively - narrow export base and remains dependent on commodity imports , particularly fuel. In addition, Jamaica depends heavily on remitta nces, which are equal to about 15 percent of GDP. Exports are concentrate d, with three - quarters destined for the U nited States, Canada and the United Kingdom . These countries are also home to most tourist s visit ing Jamaica , and the source of remittances .

Jamaican businesses still struggle with red tape and excessive bureaucracy. In international comparisons , Jamaica’s business climate is weak in the areas of taxation, accessing electricity, resolving legal disputes, obtaining con struction permits , and trading across borders.

In terms of innovation, Jamaican firms struggle with gaps in the legal framework for intellectual property , as well as weak policies and institutions for innovation. Private firms have difficulties accessing adequate levels of financing. The share of Jamaican firms with a loan is low , and firms report that a lack of access to credit is a key impediment to growth.

High electricity prices have also been a drag for businesses . Despite a decrease from US $0.39 to US$0.27 per KWh between 2012 and 2015, Jamaica’s average electricity tariff was high when compared to other countries in the region and across the world — e.g., Barbados at US$0.24 per KWh, Trinidad and Tobago at US$0.06 per KWh, and the United Stat es at US$0.1 per KWh. Electricity generation is still dependent on old, inefficient diesel generators, and it is subject to considerable technical losses, including those from theft.

Jamaica is a front runner among Caribbean countries in promoting climate and financial resilience in the face of natural disasters. The economic cost of these disasters for the Caribbean is substantial, exceeding $22 billion between 1950 and 2016, compared with $58 billion for similar disasters globally. One serious storm or natural disaster could set back the country’s growth prospects and development achievements of recent years. To tackle this, the government has adopted a Public Financial Management Policy Framework for Natural Disaster Risk Financing to facilitate the availability of dedicated resources for recovery in the face of disaster risks.

Despite unemployment at a new low, too many young people still are struggling to find a job. For Jamaica to continue to grow and prosper, it also needs to develop the skills for the work force of tomorrow, especially in the areas of technology and digitalization. This requires a sharp focus on creating the conditions for youths to strive and succeed in the modern business world and close cooperation with the private sector in this respect