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EPOC sees three-year road to recovery from COVID

Published:Wednesday | December 16, 2020 | 12:16 AMRomario Scott/Gleaner Writer

With a $72.1 billion deficit this fiscal year so far, Jamaica’s fiscal well-being continues to take a battering from the COVID-19 pandemic, with expectations that government operations will likely fall deeper into the red.

The only conciliation for the Government on this front is that the deficit, so far, has come in better than the $75.1 billion projected.

This is the latest picture on the state of the economy at the quarterly briefing of the Economic Programme Oversight Committee, EPOC, on Tuesday, following its last meeting on December 4.

EPOC co-chairman Keith Duncan while underscoring that the Planning Institute of Jamaica, PIOJ, has projected a nine per cent to 11 per cent contraction in the economy said times are really uncertain for Jamaica, although the fundamentals remain strong.

“COVID-19 continues to impact and disrupt trading partners, we look at the US, our source market for tourism and we understand that there is a significant fear and panic in those markets so it would impact our visitor arrivals. So, the impact on our economy is highly uncertain and could pose significant downside risks to our macroeconomic targets and recovery projections,” Duncan stated.

The economy, he said, is not expected to recover to pre-COVID-19 levels until fiscal year 2023-24.

“The Government has very limited fiscal space, when we look at our tax revenues and our projections. While we have exceeded (expectations) [with] this fiscal deficit of $72.1 billion, we only have room of about $804 million for the year to close out the financial year at March 31, 2021 and therefore, the Government basically has to run a balanced budget between November and the end of March,” he said.

Tax revenues of 261.7 billion was $55.9 billion below the amount collected in the similar period in 2019.

However, the Government is projecting it will rake in $168.3 billion in the fourth quarter, between March and January 2021. Comparatively, tax collections for the January-March 2020 period amounted to $164.6 billion.

“Significant tax revenues do flow in the last quarter of the year, especially in the last month when everyone makes their tax returns, GCT returns, etc. So therefore, we are hopeful that in the January to March period we can hit these targets and maintain the fiscal profile and be able to achieve the revised primary surplus target of 3.1 per cent,” Duncan said.

Fuelling the optimism of the Government too is that revenues and grants are up by roughly $2.9 billion for the period April to October 2020. Specifically, tax revenues were outperforming projections by $2.4 billion, totalling $261.7 at the end of the period.

Duncan cautioned that if the targets are not me, there could be a reallocation or reduction in expenditure to meet the target.

Regarding the blows sustained by Jamaica during the COVID-19 pandemic, EPOC presented data showing that mining and quarrying is down 22.9 per cent and manufacturing down 8.7 per cent in the good producing services, while Agriculture and Fisheries is up 2 per cent and construction up five per cent. Overall goods GDP has contracted by 3.6 per cent.

In the services industry, all categories except ‘producer of Government services’ were down. In fact, the overall decrease was measured at 13 per cent. Hotels and restaurants, which captures the hospitality and tourism market, plummeted by 63.8 per cent, having taken the hardest hit from the pandemic, due to reduced travel.

Inflation was measured to be five per cent which is within the BOJ’s target of four to six per cent, but higher than the out-turn in October 2019, which was 3.3 per cent.

The country’s non-borrowed reserves of US$2.46 billion fell US$48.9 million below the target of US$2.61 billion. Gross international reserves were measured at US$3.93 billion while the net international reserves were measured at US$2.96 billion at end-November.

romario.scott@gleanerjm.com