Jamaica - Economy

Economy

Jamaica is a mixed economy with both state enterprises and private sector businesses. Major sectors of the Jamaican economy include agriculture, mining, manufacturing, tourism, and financial and insurance services. Tourism and mining are the leading earners of foreign exchange. Half the Jamaican economy relies on services, with half of its income coming from services such as tourism. An estimated 1.3 million foreign tourists visit Jamaica every year.

Supported by multilateral financial institutions, Jamaica has, since the early 1980s, sought to implement structural reforms aimed at fostering private sector activity and increasing the role of market forces in resource allocation. Since 1991, the government has followed a programme of economic liberalization and stabilization by removing exchange controls, floating the exchange rate, cutting tariffs, stabilising the Jamaican currency, reducing inflation and removing restrictions on foreign investment. Emphasis has been placed on maintaining strict fiscal discipline, greater openness to trade and financial flows, market liberalisation and reduction in the size of government. During this period, a large share of the economy was returned to private sector ownership through divestment and privatisation programmes.

The macroeconomic stabilisation programme introduced in 1991, which focused on tight fiscal and monetary policies, has contributed to a controlled reduction in the rate of inflation. The annual inflation rate decreased from a high of 80.2% in 1991 to 7.9% in 1998. Inflation for FY1998/99 was 6.2% compared to 7.2% in the corresponding period in CUU1997/98. The Government of Jamaica remains committed to lowering inflation, with a long-term objective of bringing it in line with that of its major trading partners.

After a period of steady growth from 1985 to 1995, real GDP decreased by 1.8% and 2.4% in 1996 and 1997, respectively. The decrease in GDP in 1996 and 1997 was largely due to significant problems in the financial sector and, in 1997, a severe island-wide drought (the worst in 70 years) that drastically reduced agricultural production. In 1997, nominal GDP was approximately J$220,556.2 million (US$6,198.9 million based on the average annual exchange rate of the period).

The economy in 1997 was marked by low levels of import growth, high levels of private capital inflows and relative stability in the foreign exchange market.

Recent economic performance shows the Jamaican economy is recovering. Agricultural production, an important engine of growth increased 15.3% in third quarter of 1998 compared to the corresponding period in 1997, signaling the first positive growth rate in the sector since January 1997. Bauxite and alumina production increased 5.5% from January to December, 1998 compared to the corresponding period in 1997. January's bauxite production recorded a 7.1% increase relative to January 1998 and continued expansion of alumina production through 2009 is planned by Alcoa. Tourism, which is the largest foreign exchange earner, showed improvement as well. In the third quarter of 1998, growth in tourist arrivals accelerated with an overall increase of 8.5% in tourism earnings in 1998 when compared to the corresponding period in 1997. Jamaica's agricultural exports are sugar, bananas, coffee, rum,and yams.

Jamaica is the fifth largest exporter of bauxite in the world, after Australia, China, Brazil and Guinea.

Jamaica has a wide variety of industrial and commercial activities. The aviation industry is able to perform most routine aircraft maintenance, except for heavy structural repairs. There is a considerable amount of technical support for transport and agricultural aviation. Jamaica has a considerable amount of industrial engineering, light manufacturing, including metal fabrication, metal roofing, and furniture manufacturing. Food and beverage processing, glassware manufacturing, software and data processing, printing and publishing, insurance underwriting, music and recording, and advanced education activities can be found in the larger urban areas. The Jamaican construction industry is entirely self-sufficient, with professional technical standards and guidance.

Since the first quarter of 2006, the economy of Jamaica has undergone a period of staunch growth. With inflation for the 2006 calendar year down to 6.0% and unemployment down to 8.9%, the nominal GDP grew by an unprecedented 2.9%. An investment programme in island transportation and utility infrastructure and gains in the tourism, mining, and service sectors all contributed this figure. All projections for 2007 show an even higher potential for economic growth with all estimates over 3.0% and hampered only by urban crime and public policies.

In 2006, Jamaica became part of the CARICOM Single Market and Economy (CSME) as one of the pioneering members.

The global economic downturn had a significant impact on the Jamaican economy for the years 2007 to 2009, resulting in negative economic growth. The government implemented a new Debt Management Initiative, the Jamaica Debt Exchange (JDX) on January 14, 2010. The initiative would see holders of Government of Jamaica (GOJ) bonds returning the high interest earning instruments for bonds with lower yields and longer maturities.The offer was taken up by over 95% of local financial institutions and was deemed a success by the government. Owing to the success of the JDX program, the Bruce Golding-led government was successful in entering into a borrowing arrangement with the IMF on Ferbruary 4,2010 for the amount of US$1.27b. The loan agreement is for a period of three years.