PIOJ reports GDP contraction for remainder of this year

Business

PIOJ reports GDP contraction for remainder of this year

Says some growth may return by first quarter of next year

BY KELLARAY MILES
Business reporter
milesk@jamaicaobserver.com

Friday, May 29, 2020

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The Planning Institute of Jamaica (PIOJ) said that in light of the novel coronavirus pandemic it has estimated a gross domestic product (GDP) projection of 0.1 per cent — down from the 0.6 per cent forecast previously held for this fiscal year.

Speaking on Wednesday at a quarterly briefing to review the country's economic performance for the January-March period (which contracted by 1.7 per cent), Dr Wayne Henry, director general of the PIOJ said that the downturn across key sectors — brought on by the pandemic, will largely account for this.

“Going forward, quarterly economic contractions are anticipated, at least for the remainder of calendar year 2020, with a return to growth performance projected for the January to March quarter of 2021,” he said.

“Growth prospects for the economy are generally negative based on the anticipated impact of the COVID-19 pandemic, which led to a fall in demand for goods and services, amidst the full roll-out of measures to contain the spread of the virus,” he added.

A projected outlook for the year saw continued reductions in the goods producing industry (down 1.4 per cent), mining and quarrying (down 22.9 per cent), construction down by 1.8 per cent, services down by 0.7 per cent, and hotels and restaurants down 1.0 per cent.

Henry noted that for the remainder of the year they would also be anticipating several adverse impacts brought on by the downturn in activities. He cited these as including increased unemployment and underemployment, reduced income streams (revenues and remittances), and risk to standards of living which will result in higher levels of poverty.

“Some families have experienced the reality of a thin line between their employment, job, livelihood, and immediate risk of poverty, that is, a significant reduction in their ability to earn and consume goods and services,” he said.

He said that the resumption of positive economic activity will be based on the realisation of upside potentials. These include stronger than anticipated global demand as a result of an early rebound in global economic activities, faster than anticipated recovery of key industries, faster recovery in local demand as jobs and work hours are restored, and stronger domestic linkages as local firms satisfy local and global demand.

The director general also projected that growth is expected in the first quarter of next year, however, the uncertainty surrounding the virus and its duration remains the greatest risk to this projection.

“These developments would bring GDP performance for fiscal year 2020/21 to a contraction within a range of negative 4.0 to 6.0 per cent, the weakest economic performance in almost four decades, that is, since a contraction of 4.6 per cent was recorded in 1985,” he added.

He highlighted some collaborative measures currently being undertaken by Government to aid in the sustainable recovery of the country from the economic fallout as a result of the pandemic. These include the CARE Programme led by the Ministry of Finance, the national COVID-19 agenda led by the Ministry of Health and the Statistical Institute of Jamaica (STATIN), and the post-disaster impact assessment.

“A comprehensive quantification and description of total damage and losses will be undertaken to determine the impact of COVID-19 on the economy and society, to inform GOJ's policy or programme interventions during the recovery phase,” he said.


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