Download Impact of Crisis on Jamaica: indicators and

Impact of Crisis on Jamaica: indicators and monitoring
Notes on the Impact of the Global Crisis
on Jamaica
Prepared for UNDP, Kingston
Michael Witter
10/04/2009
Michael Witter
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Impact of Crisis on Jamaica: indicators and monitoring
I.
Indicators of the Impact of the Global Crisis
Table 1: Indicators of the Impact of the Global Crisis on Jamaica
Indicator
GDP growth rate- 2008
Change
Estimated to be -0.4% in 2008
Projected GDP growth - 2009
Job Losses
Sugar
Bananas
Bauxite/Alumina
Other
As of April 2009
7072
600
1250+
3000+

Tourism




Remittances
Fiscal deficit

Interest rates movements
Exchange rate movements
Ratings by International
Agencies
Standard and Poor’s
Date
PIOJ, February
2009
Original forecast for 2009 was 13% growth
of visitor arrivals
Revised forecast for 2009 is 2%, with decline
in average expenditure per visitor
Governor of the
Growth rate in 2007/8 was 8-9%
BoJ in January 2009
Growth rate forecast for 2008-9 is 4-5%
fiscal deficit has been fluctuating around an
increasing (negative) trend since 2000/1;
the forecast for 2008/9 is 7.4% of GDP,
marginally below the high point of 7.5% in
1997/8


180-day Treasury bill - 24.26 %
BOJ reverse repurchase rates on 180-day 21.5 %
 BOJ reverse repurchase rates on 365-day –
22.67 %
25% depreciation between September 15, 2008
and February 19, 2009

long-term foreign and local currency March 2009
sovereign credit ratings reduced from 'B' to
'B-'
 short term debt lowered from 'B' to 'C'
 transfer and convertibility assessment
lowered to 'B+' from 'BB-'
Moody’s foreign and local currency government bond
March 2009
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Impact of Crisis on Jamaica: indicators and monitoring
Trading on the Stock
Exchange
ratings to B2 from B1 and Ba2
lowest volumes traded in five years
February 2009
Table 1 presents some basic indicators of the intensifying impact of the global crisis on the performance
of the economy and the fiscal accounts of the government. They point to:



economic contraction as measured by the negative growth of the GDP and the subsequent job
losses as businesses cut-back in the face of declining markets. The most severe cuts have been
in bauxite/alumina and export agriculture – sugar and bananas. Inflows from tourism and
remittances, the main sources of foreign exchange inflows are already in sharp decline
rapid weakening of the Jamaican dollar between September 2008 and February 2009 by 25%.
The BoJ raised the interest rates to check the speculation. There is debate as to how effective
this method is. The rate of depreciation of the currency has slowed, but this has been attributed
to consultations with the largest buyers and special arrangements for some, like Petrojam. The
business community has been agitating for reduction in the interest rates. The BoJ has
responded with a marginal decline in the repo rate.
Declining confidence in the economy. In light of the deteriorating performance of the economy
and the failure of the government to contain the fiscal deficit within programmed levels, the
international rating agencies have downgraded Jamaica to the level just above the risk of default
on the national debt
The estimates of expenditure as presented to the House of Representatives to open the budget debate
of 2009/10 project 56% of recurrent expenditure allocated to interest payments, a freeze on public
sector wages, and attempts to maintain the relative shares of expenditure on education and health of a
budget that will have lower expenditure in real terms than the budget of the previous year, 2008/9.
Further, there has been no provision for major public sector enterprises, such as Air Jamaica and the
Sugar Estates. Apparently, the assumption is that these will be divested. Nor has there been any
provision for shocks such as the damage from extreme weather events which have hit Jamaica almost
every year in the last decade.
Access to international capital markets for loans is now extremely difficult, given the tightness of the
markets and the low credit rating of Jamaica. On the other hand, there may be increased access to IMF
funding.
The risks to the government and the private sector of previous years have been intensified in the
context of the global crisis. Financial flows are not as predictable and appear to be more volatile.
Guaranteed markets for exports have disappeared and other traditional markets, such as
bauxite/alumina, are weak.
Unemployment is rising, particularly in areas that depend directly and indirectly on the traditional
export industries, sugar, bananas, bauxite/alumina, and tourism, and remittances that have helped
many families to cope are at best not growing as fast as in recent years. While the number of layoffs
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Impact of Crisis on Jamaica: indicators and monitoring
from the export industries and the big companies producing for the domestic market are published, the
contraction of the myriad of small enterprises that depend on the incomes paid by the big companies is
not known. Accordingly, in addition to the traditional pockets of unemployment and poverty, there will
be new pockets in the communities that have traditionally benefited from the export industries. If
government support for safety net programmes has to be cut, the most vulnerable sections of the
population will be further exposed.
II.
Monitoring the Impact of the crisis
The conventional indicators of the performance of the economy are:
Indicator
CPI (consumer price index)
Exchange rate
Interest rate
International oil prices
unemployment
GDP
Fiscal expenditure, revenue,
balance
Balance of payments
Poverty rate
Source
STATIN
BoJ
BoJ
BoJ, Petrojam
STATIN
PIOJ
Ministry of Finance and the
Public service
BoJ
PIOJ
Frequency
monthly
daily
daily
weekly
Quarterly?
quarterly
monthly
Quarterly
annually
In addition to these, real time monitoring of the impact of the crisis will benefit from:
Safety Net


Monthly reports on applications to PATH, and bimonthly reports on benefits paid
Monthly reports on applications for assistance to Parish Councils, especially those that are in
areas affected by the cutbacks in bauxite/alumina and sugar
Prices

Weekly, but at least monthly, monitoring of a basket of selected basic foods. The Ministry of
Health already does this on a quarterly basis
Cost of Living



Monthly reports on arrears in mortgage payments from the NHT, and the Building societies
Monthly reports on foreclosures on houses, and auctions held on cars and houses seized by
financial institutions
Monthly reports on arrears on loan repayments from credit unions
Unemployed workers
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Impact of Crisis on Jamaica: indicators and monitoring



Monthly reports from the PSOJ, the JMA and the JC of C on layoffs reported by their
membership
Quarterly surveys of laid-off workers
Quarterly surveys of Trade Union officers on developments in the labour market
Children



Monthly reports on children seen at Bustamante hospital and selected clinics, especially in the
areas affected by cutbacks in bauxite/alumina and sugar, who are diagnosed with malnutrition
Quarterly surveys of primary school children and teachers, especially those who are in areas
affected by the cutbacks in bauxite/alumina and sugar, to determine levels of nutrition
Quarterly surveys of children in selected basic schools for nutritional intake
Mothers and Senior citizens

Monthly reports on pregnant and lactating mothers and senior citizens seen at selected clinics,
especially in the areas affected by cutbacks in bauxite/alumina and sugar, who are diagnosed
with malnutrition
Other


Monthly reports on robbery and fraud from the Police
Monthly reports on persons seen at Ward 21 at UWI and Bellevue Hospital for depression
related to loss of employment and/or other economic challenges
Monitoring is probably best done under the aegis of the Prime Minister’s office acting through the PIOJ,
with support from a team of at least two persons responsible for collation of data and completing report
templates designed by the PIOJ in collaboration with the UNDP. Data on the non-traditional indicators
proposed above will have to be secured through special arrangements facilitated by the Prime Minister’s
office and the relevant public sector agencies.
Surveys will have to be contracted out to teams with the relevant expertise.
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