The International Monetary Fund (IMF) projects the Jamaican economy to contract by 5.6 per cent in 2020 from its previous growth forecast of 1.0 per cent, arising from what the lending agency described as the ‘Great Lockdown’.
Already, the economy contracted in the fourth quarter marginally, in dollar terms, with the economy registering total value added of J$197.01 billion versus J$197.09 billion a year earlier, according to the Statistical Institute of Jamaica in just-released data. But overall, preliminary estimates for the calendar year 2019 showed 0.9 per cent growth in the Jamaican economy.
“Jamaica will experience a massive economic shock as a result of the COVID-19 pandemic. This, of course, is not unique to Jamaica,” stated Minister of Finance Dr Nigel Clarke in response to Financial Gleaner queries on the IMF forecast.
“The Latin American and Caribbean average growth outcome is forecast to be similar to Jamaica’s, and many Caribbean countries are forecast to have even more significant declines. This will be a tough time for Jamaica, our region and the world.”
In recent days, a number of multilateral institutions and credit rating agencies have issued a range of economic and growth forecasts, including the IDB, IMF and Fitch. Clarke said that these forecasts vary but put the island in a strong position to rebound. Last week, Fitch revised Jamaica’s outlook from positive to stable but maintained the island’s rating. Fitch, however, downgraded a series of peers, including Colombia and Aruba, while Standard & Poor’s downgraded Trinidad & Tobago.
The IMF projections of negative 5.6 per cent in 2020 will follow a forecast of growth of 3.5 per cent in 2021, according to IMF tables within its World Economic Outlook released on Tuesday.
The downward revision comes amid an overall decline in global growth and downward revisions for several countries. The IMF projects the world economy to contract by 3.0 per cent: Advanced economies are set to decline by 6.1 per cent, while emerging economies are expected to decline by 1.0 per cent.
WORST RECESSION
The IMF stated that it is “very likely” that the global economy will experience its worst recession since the Great Depression, and surpass that seen during the global financial crisis a decade ago. Jamaica experienced its worst decline during the period of the global financial crisis at negative 4.8 per cent in 2009.
“The Great Lockdown, as one might call it, is projected to shrink global growth dramatically. A partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound,” stated the IMF.
The IMF stated that this crisis was like no other.
“In normal crises, policymakers try to encourage economic activity by stimulating aggregate demand as quickly as possible. This time, the crisis is, to a large extent, the consequence of needed containment measures,” the IMF stated. “This makes stimulating activity more challenging and, at least for the most affected sectors, undesirable.”
Source: http://jamaica-gleaner.com/article/lead-stories/20200415/jamaican-economy-shrink-56-imf