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

71
The construction sector will increase its rate of growth (2.2percent and 3.4percent in the
pre and post Ivan scenarios) propelled by on-going reconstruction activities.
The expected growth of real estate and business services will decline from 1.5percent to
0.6 percent as a result of the damage sustained by the housing sector.
Finally the tourism sector will record a one percentage decline from the rate of growth
expected without taking into account the disaster (7percent and 6percent in the pre ad
post Ivan scenarios) due to the temporary closure of some of the hotels affected by the
hurricane. It is expected nonetheless that the tourism will fully recover before the end of
the year to take advantage of the high season and that the visitor arrival flows will return
to their previous trend. Thus far employers have not opted for cutting employment and in
some cases are using their workers for relief and reconstruction activities (i.e., picking-up
of debris).
3.2 Prices, wages and employment
The rate of inflation will rise due to a decline in the supply of foodstuff consequent upon
the effect of the event on agricultural output. On a point-to-point basis the rate of
inflation will increase from 10percent to a range comprised between 11percent and
12percent. The rate of inflation will not be significantly affected in so far as the overall
monetary and exchange rate conditions of the economy remain stable.
Temporary increases in unemployment will occur in some of the affected activities that
are labor intensive. In the previous section it was mentioned that the banana sub-sector
will sustain 8 000 temporary job losses.
3.3 The evolution of the external sector
The current account deficit will expand from 10percent to 11percent of GDP in the pre
and post Ivan scenarios) (See Table III.4). The current account imbalance will be more
than compensated by the surplus in the capital and financial account. The projected level
of reserves in the pre-Ivan scenario will not be affected in any significant way by the
impact of the Hurricane.
It is expected that due to the effects of the event on mining and agriculture, merchandise
exports will decline. At the same time merchandise imports responding mainly to the
reconstruction needs and to the necessity of replacing lost output will rise. As a result the
merchandise balance will widen its gap from 28percent to 30percent of GDP with and
without taking into account the effects of the Hurricane.
The services balance will reduce its expected surplus reflecting the effect of the
Hurricane on stop-over arrivals. The estimated decline in the expected surplus for 2004
will be of the order of –6percent. In spite of the effects of the Hurricane, the services
surplus will increase by 3percent in relation to 2003. The majority of hotel
71