Jamaican economy to decline 2.1 per cent in third quarter

The Jamaican economy is expected to decline by 2.1 per cent in the third quarter of the calendar year as a result of the economic dislocation caused by Hurricane Beryl and low tourism growth.

“These developments represent a significant growth shock which is expected to result in a contraction of 0.2 per cent for fiscal year 2024/25 down from the initially expected expansion of 1.8 per cent,” said Finance Minister Dr Nigel Clarke.

He was speaking yesterday in the House of Representatives where he presented the First Supplementary Estimates for the 2024/25 fiscal year which adds $40.7 billion to the national budget.

The additional amount is largely tied to the government’s recovery efforts from the devastating effects of Hurricane Beryl which impacted the country on July 3. Clarke said the increased expenditure is entirely due to expenses on the recurrent side of the budget where both debt and non-debt expenses have increased.

Recurrent programme expenses have increased by $31.3 billion reflecting among other things, the additional expenses undertaken to initiate recovery from the impact of the hurricane ($11.8 billion).

Also included in recurrent programmes are additional subvention amounts to a number of public bodies including the University of the West Indies, the University of Technology, the Jamaica Urban Transit Company, Montego Bay Metro Limited, National Water Commission, the University Hospital of the West Indies, Transport Authority, Jamaica Agricultural Commodities Regulatory Authority, Jamaica Racing  Commission, Jamaica Ultimate Tyre Company, Firearm Licensing Authority, the National Solid Waste Management Authority and other agencies under the Ministry of Local Government and Community Development.

Municipal Corporations are also being allocated additional subvention amounts.

Clarke said recurrent programme increases include the provision of amounts related to the SPARK programme to facilitate preparatory activities such as design and the ordering of pipes for the programme.

Additionally, wages and salaries are also slated to increase by $11.6 billion, primarily due to higher than originally included third year costs under implementation of the restructured public sector compensation system.

The finance minister told the House that interest payments are estimated to be $9.6 billion greater than originally budgeted, primarily reflecting the impact of adjustments in interest rates.

“The increase in recurrent expenditure is somewhat countered by a $12.1 billion decrease in capital expenditure which represents a decrease on the contingency provision for capital programmes given the need to accommodate spending associated with the recovery from Hurricane Beryl as well as the preparatory activities for the SPARK programme on the recurrent side of the budget,” Clarke explained.

The additional amounts will be financed primarily through estimated additional revenue and grant inflows of $40.2 billion arising primarily from additional non-tax revenue flows of $33.2 billion and tax revenue flows of $5.8 billion.

The increased non-tax revenue flows include the higher than estimated flows from securitisation of the Norman Manley International Airport revenue flows that are due to the government. Utilisation of available cash resources of $4.4 billion will provide the additional financing required.