The Planning Institute of Jamaica (PIOJ) is reporting that the economy contracted by an estimated 1.7 per cent for the January to March 2020 quarter, relative to the corresponding period last year.
The Institute says that the March 2020 quarter out-turn largely reflected implementation of measures to manage the coronavirus (COVID-19) pandemic, which commenced in mid-March; and lower capacity utilisation within the mining and quarrying industry, following the temporary closure of the JISCO Alpart refinery in September 2019 to upgrade capacity.
Director General, Dr. Wayne Henry, said that if ratified by the Statistical Institute of Jamaica (STATIN), the out-turn would end the extended period of 20 consecutive quarters of no economic contraction, which saw the economy growing over 19 quarters, while remaining flat for the October to December 2019 period.
The Director General was speaking at the PIOJ’s digital quarterly media briefing on Wednesday (May 27).
While noting that the estimated growth out-turn for Fiscal Year 2019/20 is 0.1 per cent, down from the previous forecast of 0.6 per cent, and acknowledging that, going forward, “quarterly economic contractions are anticipated, at least for the remainder of calendar year 2020”, Dr. Henry is projecting a return to growth by the January to March quarter of 2021.
He also said the contraction was due to continued slow-down in construction-related activities following the conclusion of major road infrastructure projects, the slow start-up of new projects as well as a slowing in building construction activities.
Dr. Henry pointed out that the aforementioned factors resulted in the goods producing and services industries each contracting by 1.5 per cent.
He pointed out that Agriculture, Forestry and Fishing, up 7.8 per cent, and Manufacturing, up 2.7 per cent, were the only Services Industry subsectors recording growth during the review period.
The Director General pointed out that Agriculture, Forestry and Fishing’s performance was facilitated by more favourable weather conditions and increases in hectares reaped and output per hectare.
He said the out-turn for manufacturing reflected growth in both the Food, Beverages and Tobacco, and Other Manufacturing components.
Dr. Henry noted, however, that Mining and Quarrying fell by 3.7 per cent, and Construction, two per cent.
He explained that the out-turn for Mining and Quarrying was due mainly to declines in alumina production, down 39.9 per cent due to the closure of JISCO Alpart, and lower production at the Jamalco alumina plant.
Crude bauxite production, he added, fell by 23.4 per cent due to a contraction in demand from third-party customers.
Dr. Henry said the out-turn for construction reflected a downturn in both the Building Construction and Other Construction components.
“The contraction in the Building Construction component was due to a decline in residential and non-residential construction, reflecting a 91.2 per cent decrease in housing starts by the National Housing Trust (NHT) to 382 units. However, there was an increase in the volume (up 7.1 per cent) and value (up 47.1 per cent) of mortgages disbursed by the NHT,” he informed.
Meanwhile, Dr. Henry said the estimated downturn in the Other Construction component reflected reduced capital expenditure by institutions such as the Jamaica Public Service, which disbursed $1 billion relative to $1.8 billion.
“The contraction was, however, tempered by increased capital expenditure by the National Road Operating and Constructing Company (NROCC), which disbursed $482.4 million on Part A of the South Coast Highway Improvement Project (SCHIP), relative to no expenditure in the corresponding quarter of 2019, and the Urban Development Corporation (UDC), which disbursed $231.94 million, up 265.3 per cent,” he further outlined.
Meanwhile, Dr. Henry said the out-turn for the Services industry largely reflected a downturn in Hotels and Restaurants, down 13.9 per cent; Transportation, Storage and Communication, down 2.6 per cent; and the Other Services industries.
“The performance of these industries was negatively impacted by the measures implemented globally and locally to manage the COVID-19 pandemic, particularly in the areas of air, land and maritime transportation; tourist accommodation; and entertainment services,” he pointed out.
The Director General noted that the out-turn for Hotels and Restaurants largely reflected a fall in foreign national arrivals during March, associated with the Government’s decision to close Jamaica’s borders to air travel to mitigate the spread of COVID-19.
He said data on total airport arrivals during the quarter indicate a 17.9 per cent decline during January to March 2020, “largely reflecting the impact of the restrictions imposed locally and globally”.
However, for the period January to February 2020, Dr. Henry said total stopover arrivals grew by six per cent to 462,940 visitors.
“Total visitor expenditure for the two-month period is also estimated to have increased by 5.9 per cent to US$694.64 million, of which stopover visitor expenditure increased by 7.2 per cent to US$656.3 million,” he outlined.
Conversely, Dr. Henry said the Finance and Insurance Services, and Electricity and Water Supply sectors grew by an estimated 1.3 and 2.1 per cent, respectively.
He told journalists that the out-turn for Finance and Insurance Services reflected increases in the net interest income on the stock of loans and advances, and fees and commission income.
“This industry also benefited from financial activities associated with the Initial Public Offering (IPO) of Trans-Jamaica Highway, the largest IPO on the Jamaica Stock Exchange, which raised $14.1 billion during the quarter,” the Director General pointed out.
This, he added, reflects “the Government of Jamaica’s continued commitment to the divestment of State-owned assets through the market to reduce the debt burden, while simultaneously expanding financial inclusion/access to all Jamaicans”.
Dr. Henry said the growth prospects for the April to June 2020 quarter are “generally negative”, based on the anticipated impact of COVID-19, noting that the economy will contact within the range of -12 to -14 per cent, with the overall 2020/21 fiscal year projection being between four and six per cent.