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

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likely as it stands the increase in expenditure due to the Hurricane, above what was
projected for FY 2004/2005 will be covered by grants and concessional lending.
An additional factor that should be taken into account when analysing the effect of
Hurricane Ivan on revenues and expenditures is that the net fiscal outturn from April to
August of 2004 was above that projected for the period. It exceeded the projection by 510
millions J$ which provides a buffer stock to finance part of the expenditures occurring as a
result of the disaster without receiving grants or having access to concessional lending.
3. Monetary policy
The effects of Hurricane Ivan on monetary magnitudes and hence on monetary policy will
be determined by the fiscal and balance of payments results in the post-Ivan scenario. At
the time of the writing of this report the impact of the event on the fiscal and balance of
payments results was estimated to be minor. The fiscal deficit is expected to remain
roughly within the vicinity of 4percent of GDP and the stock of reserves will not vary in
any significant way as a result of the effect of the Hurricane on the balance of payments to
warrant the adoption of a contractive monetary policy.
As a result it is unlikely that monetary policy will vary in any significant way its stance for
the rest of the year. The authorities will remain set on lowering, within a reasonable range,
the term structure of interest rates. Also although the projected rate of inflation is higher in
the post relative to the pre-Ivan scenario, it is still lower than that recorded in 2003.
3. Evolution of the main variables
3.1 Economic activity
Taking into account the effects of the disaster on the productive sectors the level of
economic activity will register a 1.9percent growth for 2004 (2.6percent pre-Ivan). This
will result from the losses in output flows in the agriculture; mining; manufacturing;
electricity and water; transport storage and communication; real estate and business and the
tourism sector. Among these the most affected sectors are agriculture, electricity and water
and transport storage and communications.
The agricultural sector (-1percent and –5percent for the pre and post Ivan scenarios) was
affected by heavy rainfalls and floods, which had a significant impact on the sector’s assets
and production flows. Damage was caused to physical infrastructure and equipment to
domestic crops (mainly vegetables, fruits, bananas, plantains, ground provisions and tree
crops) and to traditional export products (banana, coffee, sugar cane, cocoa, pimento and
citrus). The agricultural sector had already been affected by adverse climatic conditions in
the first part of the year. With the exception of coffee, half of the losses in production flows
and income in this sector will take place during the current year and the rest in 2005. In the
case of coffee, the agricultural sector will continue to sustain losses until 2007 estimated at
292 million J$. As agricultural activities are highly intensive in labor the Hurricane will
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