Review of Jamaica’s Economic Performance October – December 2020

The PIOJ presented the preliminary estimates on economic performance for quarter the October to December 2020 quarter. The following were noted:

Overview of Real Industry Developments 

• For October to December 2020, real GDP fell by an estimated 9.4% relative to the corresponding quarter of 2019. The Goods Producing and Services Industries contracted by 0.6% and 11.5% respectively.
• Within the Goods Producing Industry, there were decreases in output for Manufacturing (3.4%) and Agriculture, Forestry & Fishing (6.1%). Whereas Construction and Mining & Quarrying increased by 6.2% and 6.0% respectively.
• All industries within the Services Industry recorded a fall in real value added for the second quarter 2020, excluding Producers of Government Services. The industries estimated to have registered the largest contraction were Hotels & Restaurants (down 52.8%); Other Services (down 20.0%); and Transport, Storage & Communication (down 15.2%).
• For calendar year 2020, real GDP is estimated to have fallen by 10.2%. This was the first year of contraction following seven consecutive years of GDP growth.  The Service’s Industry was estimated to contract by 11.3% while the Goods Producing Industry was estimated to contract 4.7%. All industries, with the exception of Producers of Government Services, observed a contraction in output. The sharpest contractions were recorded in industries associated with travel and tourism as well as the Mining & Quarrying industry, namely: Hotels & Restaurants (down 53.5%), Other Services (down 23.4%), Transport Storage & Communication (down 13.5%) and Mining & Quarrying (down 21.7%).

Production Performance by industry

The Agriculture, Forestry & Fishing industry’s output was estimated to have contracted 6.1. Performance for the quarter was attributed to “heavy rainfall at the start of the quarter which led to the damage of crops as a result of flooding, as well as reduced demand associated with the fallout in visitor arrivals due to COVID-19 and associated restrictions” as noted by PIOJ.

The main contributor was the category Other Agricultural Crops which fell by 8.5%, due to lower production in six of the nine crop groups.  The most significant contractions were recorded for: Condiments (down 37.0%), Legumes (down 27.2%): Fruits (down 19.2%); and Vegetables (down 14.4%). Additionally,  Traditional Export Crop sub-industry declined by 5.6%, largely due to reduced production of Banana, Coffee and Cocoa, which outweighed a 24.1% increase in sugar cane production. These were tempered by a 6.7% growth in Animal Farming due to increase in broiler meat production and a 21.4% increase in egg production.

Real value added for Mining & Quarrying industry rose by 6.0%. This uptick reflected an increase in alumina and crude bauxite production. Alumina production rose by 6.9% largely attributable higher production at the two operating alumina refineries which were both impacted by technical issues in the corresponding quarter of 2019, which curtailed output. PIOJ noted that, “the alumina capacity utilization rate increased to 40.7%, from 38.0% in the corresponding quarter of 2019.” Crude bauxite production rose 4.2%, attributable to higher demand, resulting in a higher average bauxite capacity utilization rate of 2.4 percentage points to 60.1%.

The Manufacturing industry registered a decrease of 3.4%. This contraction resulted from lower output in the Other Manufacturing sub-industries whilst the Food, Beverages & Tobacco sub-industry was estimated to have grown. The Other Manufacturing sub-industry contraction reflected lower output for Petroleum Products.  The reduction in the Petroleum Products category reflected downturns in the output of Liquid Petroleum Gas (down 50.3%); Fuel Oil (down 29.3%) and Turbo Fuel (down 52.4%). With respect to Food, Beverages and Tobacco, the growth was due to estimated increases in output of Poultry Meat (up 6.1%), Animal Feeds (up 4.8%) Cornmeal (up 46.5%), Sugar (up 37.8%) and Bakery Products (up 9.0%).  The Beverages & Tobacco component was supported by an increase in the production of Rum & Alcohol (up 13.5%) and Carbonated Beverages (up 10.8%).

Real value added for the Construction industry rose by an estimated 6.2%. This was due to growth in the Other Construction components. This performance was attributable to increased capital expenditure on civil engineering activities by the National Works Agency, up 19.1% to $3.8 billion, due to expenditure on the South Coast Highway Improvement Project; and the Urban Development Corporation, up 51.1% to $405.2 million. The movement in Building Construction was due to downturn in Housing Starts and the value of Mortgages disbursed by the NHT, down 80.6% and 12.3%, respectively.

Reduced activities in the Transport & Storage component resulted in a contraction in real value added for the Transport, Storage and Communications industry of an estimated 15.2%. This decline was driven by a decrease in air transport component, reflecting decreased passenger movement down 73.0%, due to Departures (down 74.4%) and Arrivals (down 71.2%); and a downturn in the Maritime transport component, as a result of a 12.3% decline in the total cargo volume handled at the island’s seaports. Cargo volume handled at the heavier weighted Port of Kingston fell by 17.6 %.

Reduced electricity and water consumption resulted in a contraction in real value added for the Electricity & Water Supply industry by 9.2%. Electricity consumption decreased by 10.7% resulting from lower consumption in all categories. There were lower sales in all parishes except St. Elizabeth which increased by 1.1%. Furthermore, water consumption declined by 3.2%, due to lower consumption in the Western division (down 12.4%) which outweighed the increased consumption in the Eastern division (up 1.8%).

The Finance & Insurance Services industry contracted by 5.0% during the quarter, primarily due to reduced profitability of deposit taking institutions, reduced profitability at investment management firms and a decline in the Life insurance and General insurance sectors.

Real Value Added in the Wholesale & Retail Trade; Repair and Installation of Machinery (WRTRIM) fell by an estimated 10.4% and was due to an estimated contraction in related Goods-Producing industries, worsened Consumer and Business Confidence, and lower levels of employment. However, the decline in the industry was offset by a 27.6% rise in remittance inflows for October-November 2020; and a 0.4% increase in the value of Automated Banking Machines (ABM) and Point of Sales transactions. Reduced sales were recorded for seven of the eight goods categories, led by: Minerals, Fuels, Lubricants & Petroleum Products (down 28.6%),  Motor Vehicles, Auto Repairs & Accessories (down 24.4%), and Textiles, Clothing, Shoes & Jewelry (down 23.6%).

Real value added for the Hotels and Restaurants industry decreased by 52.8%, reflecting a decline in Total Stopover Arrivals by 72.0% and the absence of cruise passenger arrivals. Total Visitor Expenditure fell by 61.9% to US$355.4 million.

Outlook 

PIOJ highlighted that, “the prospects continue to be negative, based on an uptick in the COVID-19 positivity rate in the local economy which can cause an extension of current restrictions, the implementation of new restrictions in the economies of Jamaica’s main trading partners in Europe and North America which will dampen external demand for key goods and services, slower than expected pick up in the global economy, especially in the travel industry,  lower output in Agriculture due to the fall-out in demand and a general downturn in demand and output in the short term reflecting the impact of increased unemployment levels, reduced consumer confidence and reduced operating hours for some businesses.”

Furthermore, the PIOJ projects that real GDP for the January–March 2021 quarter to contract within the range of 7.0% to 9.0%. Which would represent the smallest rate of quarterly contraction for fiscal year 2020/21 if realized.

PIOJ noted that, “Real GDP for Fiscal Year 2020/21 is projected to contract within the range of 10.5% to 12.5%.”