PIOJ estimates a 2.8% contraction in Real Value Added for Q3 2024

November 21, 2024

According to preliminary estimates from the Planning Institute of Jamaica (PIOJ), for the July – September 2024 quarter, the Jamaican economy contracted with Real Value Added estimated to have declined by 2.8% relative to the corresponding quarter of 2023. The estimated outcome for the review quarter was significantly influenced by the negative effects of Hurricane Beryl and other hydrological events.

This downturn is attributed to an anticipated decline in both the Goods-Producing and Services sectors. The industries most severely affected by the hurricane were:

  1. Agriculture, Forestry & Fishing – Domestic crop production was severely affected, with 13 of 14 parishes recording a decline in hectares reaped during the review quarter.
  2. Mining & Quarrying – the industry was adversely affected by Hurricane Beryl, which caused infrastructure damage to the Port at Rocky Point. This necessitated the diversion of alumina exports to an alternative port as well as tempered production.
  3. Hotels & Restaurants – the cancellation of flights and diversion of visitors to alternative destinations adversely affected the industry.
  4. Electricity & Water Production – the industry experienced significant damage and loss as a result of the destruction to infrastructure assets caused by Hurricane Beryl. Sections of the island were negatively impacted by the delays in restoring electricity, which had implications for production across other industries.
  5. Transport, Storage & Communication – The industry was impacted by the closure of Jamaica’s international airports and aerodromes, and the consequential temporary cessation of travel to the Island. Damage to telecommunication systems limited internet and phone access.

The performance was further impacted by weakened demand, which led to reduced economic activities and a decline in business confidence. Additionally, the US State Department issued a second Level 3 Travel Advisory in July 2024, advising travellers from Jamaica’s largest source market to reconsider travel to Jamaica. This advisory, which is the second most severe, significantly affected the tourism sector.

The Goods Producing Industry is estimated to have contracted by 6.5%, due to lower output by all industries in the category, which include: Agriculture (-13.5%), Mining & Quarrying (-15.2%) industries, Manufacturing (-2.0%) industry and Construction (-2.8%).

The weakened performance of the Goods Producing Industry stemmed mainly from adverse weather conditions, particularly effects of Hurricane Beryl as well as a contraction in Alumina and Crude Bauxite production.

The Services Industry was estimated to have contracted by 1.2%, relative to the corresponding quarter of the previous year. This reflected lower Real Value Added for these industries: Electricity & Water Supply (-5.8%), Transport, Storage & Communication (-2.8%), Wholesale & Retail Trade; Repair and Installation of Machinery (-1.4%). However, both Finance & Insurance Services (+1.0%), and Hotels and Restaurants (+2.1%) industries experienced growth.

The weakened performance in the Services Industry was primarily driven by a decline in electricity and water consumption, due to the damage to transmission and distribution assets of the utility providers. Also, there was a decline in both air and maritime transport activities, due to lower passenger movements.

Outlook 

For October – December 2024, the economic growth prospects for Jamaica are negative, largely due to the adverse impact of Hurricane Beryl and other hydrological events. It is anticipated that the economy will contract within the range of -1.5% to 0.0%, resulting in a calendar year out-turn within the range of -1.0% to 0.0%. This projection is further supported by preliminary data received for October 2024, which indicate downturns in:

  • Hotels & Restaurants: Provisional data reflect a decline of 1.1% in airport arrivals to 194,830 visitors.
  • Construction: Impacted by a downturn in capital expenditure on infrastructure works due to work stoppages and delays in fund disbursement.
  • Agriculture: Expected to return to growth in the new Fiscal Year (2025/26) as crops recover from weather events.
  • Other Services: Affected by travel advisories and industrial disputes.

However, the Mining & Quarrying industry is anticipated to record positive performance, with October 2024 data indicating an 18.6% growth in alumina production, despite a 9.0% decline in crude bauxite production. For Fiscal Year 2024/25, the projection is for an outturn within the range of -1.5% to 0.0%.

In summary, Preliminary data indicate that the Jamaican economy experienced a downturn during the review quarter due to Hurricane Beryl and subsequent hydrological events, including Tropical Storm Rafael. These events are expected to negatively impact output during October-December 2024. While overall economic performance is projected to stabilize with flat growth in January-March 2025, the agricultural sector is not expected to recover until the first half of Fiscal Year 2025/26. These shocks have hindered sustained economic growth, highlighting the need to re-examine and prioritize plans to address these challenges, especially given Jamaica’s goal of achieving a Debt to GDP ratio of 60% or less by Fiscal Year 2027/28.

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2024-11-21T11:54:46-05:00