The Planning Institute of Jamaica (PIOJ) Wednesday said that the island had recorded an 11.3 per cent economic decline for the second quarter when compared to the same period last year.
In its quarterly briefing, the PSOJ said that the continued contractions during the July to September period, stem from several adverse impacts including those associated with the novel coronavirus (COVID-19) pandemic, lower outturns from the mining and quarrying industry due to the temporary closure of the JISCO/Apart alumina refinery, weakened business and consumer confidence associated with uncertainties regarding the duration and impact of the pandemic.
The situation was also exacerbated by the reductions in income due to job losses and reduced work hours.
The PSOJ said that many of the major industries such as those in the service industries, especially the hotel and restaurants sector, continued to experience decline during the three month period.
However, a further decline during this period was tempered by growth in the agriculture sector (up 2.0 per cent) along with an uptick in construction activities due to some exemptions from imposed measures and the phased reopening of the economy.
“As we continue to grapple with the COVID-19 pandemic, there is still a lot of uncertainty globally. In our case, we have been managing the pandemic fairly well and I think as we continue to do that we may see a slowing in the pace of the decline throughout the short-term,” said PSOJ director general, Dr Wayne Henry.
The PIOJ in its preliminary estimates further said that there was a 10.7 per cent decrease in the country’s real gross domestic product (GDP) for the first nine months of this year.
“This reflected lower real value added for both the goods producing industry, down 6.0 per cent and the services industry, down 11.4 per cent,” it said, noting that in the short-term economic outlook, the general prospects for the remainder of the year are expected to remain negative with gross domestic product (GDP) recovery expected within the next three-four years and the labour market in the next two-three year
Meanwhile, Finance and the Public Service Minister, Dr. Nigel Clarke, says the government’s capitalisation of the Central Bank to the tune of J$50 billion (One Jamaica dollar=US$0.08 cents) over two previous budgets was critical in ensuring liquidity in the system, better enabling the government to cushion the effects of the global pandemic.
“It was a good thing we did it and did it at that time. When the pandemic hit Jamaica earlier this year and asset prices began to fall and customers of banks no longer were paying on time, liquidity became an issue,” Clarke said as he piloted the Bank of Jamaica (Amendment) Act in Parliament on Tuesday.
Clarke said the central bank was able to inject over J$50 billion of liquidity into the system by purchasing bonds from financial institutions.
“By purchasing those bonds, which are assets that they held, they injected cash into the system, which allowed Jamaica to absorb the pressure that has come from this crisis,” he said, adding “that wouldn’t have been as easy had we not capitalised the central bank in the way that this Bill envisions that we do, and we maintain that”.
The Bank of Jamaica (Amendment) Act, which was passed and now goes before the Senate, seeks to improve the governance of the central bank.
Clarke said it is designed to modernise and strengthen the BOJ and allow for greater transparency and accountability to maintain national economic well-being.
“This Bill clarifies the mandate of the central bank, provides for adequate capitalisation and institutes a robust and modern institutional framework,” he said, adding “it minimises the prospects of fiscal dominance as we’ve had in Jamaica’s past, by restricting conditions by which the Government of Jamaica can borrow from the central bank and the amounts”.
He noted that the Amendments to the Act is an important step to modernise Jamaica’s monetary apparatus, specifically the BOJ, through clarification of its mandate and enhancement to its governance structures.
Leader of the Opposition, Mark Golding, in supporting the Bill, said one of the main objectives of the legislation is to establish inflation targeting in law in Jamaica.
“In practice, it has already commenced because the Government set an inflation target during the period prior to this Bill being produced and tabled but it wasn’t provided for in any legislative framework.
“This Bill now enshrines inflation targeting as one of the principal objectives of the Bank of Jamaica. This is a very important issue, because that was not previously the primary role of the central bank,” he pointed out.