Similar outlook for the rest of the fiscal year

Durrant Pate/Contributor

A positive outlook for the July-September 2022 is the latest assessment by the Planning Institute of Jamaica (PIOJ), which has also warned of factors which could inhibit the progress.

The PIOJ says the short-term economic outlook for the current quarter is based on a number of factors such as the continued economic recovery in most industries, as operations gradually return to normalcy and the strengthening of the global economy which augurs well for external demand. This is supported by efforts being made at restoring the global supply chain, particularly for commodities such as energy and grains.

In its assessment, the PIOJ pointed to improved labour market out-turn, which is expected to bolster domestic demand and the gradual reopening of the JAMALCO alumina plant, which will remove the drag on growth caused by the downturn in the Mining & Quarrying industry.

Factors that could affect positive outlook

However, this positive outlook could be adversely impacted by adverse weather conditions during the hurricane season and that plant downtime due to relatively aged equipment in major industries, particularly in Mining and Manufacturing. In addition, slower than expected recovery in the markets of Jamaica’s main trading partners.

Against this background, the PIOJ has assessed that “for July–September 2022, growth in output is anticipated to be within the range of 2.0 per cent – 3.0 per cent. This projection is based on expected growth in most industries led by the Services Industry, in particular Hotels & Restaurants, Other Services and Transport, Storage & Communication”.

Early indicators are positive, as reflected in Hotels & Restaurants with an increase in preliminary airport arrivals, up by 33.4 per cent to 245,102 persons for the month of July 2022 as well as electricity and water supply, reflecting increases in both electricity and water consumption. Electricity consumption for the month of July 2022 increased by 0.8 per cent.

Contraction in Mining & Quarrying

Mining & Quarrying is expected to contract during the quarter. However, the pace of contraction will be tempered as a result of the limited resumption of production at the JAMALCO Alumina refinery during July 2022. JAMALCO produced approximately 9 000 tonnes of alumina during the month.

For the month of July, total alumina production decreased by 75.0 per cent and crude bauxite production contracted by 10.1 per cent. It is anticipated that the industry will return to positive performance in the latter half of the fiscal year 2022-23.

Current projections are that for all quarters of FY 2022-23 the country will record higher levels of output relative to the subdued performance in FY2021-22. Consequently, the PIOJ’s projection is for growth in output within the range of 3.0 per cent–5.0 per cent for the full fiscal year.

Economic projection for 2023-2024

The PIOJ is projecting that economy is not expected to attain pre-COVID GDP levels until financial year 2023-24. The preliminary data presented on performance for the April to June 2022 quarter indicates that the process of recovery from the pandemic has continued.

According to the PIOJ, “the strength of the recovery in the domestic economy has eclipsed the negative impact on growth posed by the challenges in the global economy, including supply chain disruptions. There have been some concerns about the likelihood of the country experiencing a recession, based on the weaker than expected performance of the US economy”.

It is undeniable that the Jamaican economy is inextricably linked to the US economy, given the high dependence on trade and capital flows and investment from that source. Therefore, any adverse developments in the economy of Jamaica’s largest trading partner will negatively impact it.