Jamaica: Macro-Socio-Economic and Environmental Assessment of ...

52
VII.
MACROECONOMIC EFFECTS OF THE DAMAGE
VII.1 Introduction
This chapter comprises four sections. The first two sections present an analysis of the
macroeconomic trends in the previous year (i.e., the year prior to the disaster) and in the
two quarters of the year 2004 preceding the natural disaster. The third section analyses the
short run expected performance of the economy without the disaster. The final section
provides a macroeconomic assessment of the disaster. All the sections survey the overall
economic trends of the economy, fiscal policy, the external sector and the financial system
to the extent that is permitted by data availability.
All estimations were carried out on the basis of official data and also on information
provided by private sector organizations. They are presented in Jamaica Dollars unless
indicated otherwise.
For 2004, overall GDP is projected grow by 1.9 percent in the aftermath of hurricane Ivan
compared with 2.6 percent in the pre-disaster scenario. The most affected sectors include
agriculture (-0.8 percent and -5 percent in the pre and post Ivan scenarios), electricity and
water (3.7 percent and 2.2 percent in the pre and post Ivan scenarios), transport storage and
communications (3.4 percent and 2.6 percent for both scenarios respectively) and to a lesser
extent manufacturing (4.7 percent and 4.2 percent for both scenarios respectively) and
mining (9.9 percent and 9.0 percent for both scenarios respectively).
The effects of Hurricane Ivan are not estimated to be significant enough to hamper the
attainment of the macroeconomic targets set by the authorities. The fiscal deficit will
remain as projected within the vicinity of 4percent and the current account deficit, due to
the good performance of the economy in the first half of the year, is projected to be roughly
between 9 percent and 10 percent of GDP. Under controlled fiscal and balance of payments
conditions and given the stability of exchange rate movements, monetary policy will
maintain its current stance.
VII.2 The pre-disaster situation: the evolution of the economy in the year prior to the
disaster
1. Main trends
During 2003 the Jamaican economy registered the strongest growth performance in more
than a decade (1.1 percent and 2.3 percent in 2002 and 2003). The behaviour of economic
activity responded to the ongoing dynamism of mining (4.8 percent) and the recovery of the
agriculture and tourism sectors (5.7 percent and 6.0percent respectively). (See Table III.1
for the main macroeconomic indicators).
52