capital, and future earning potential of students if not addressed adequately. JAMAICA Key conditions and Jamaica is also highly vulnerable to exter- nal shocks given its reliance on imports challenges and tourism. Tourism and agriculture, which account for more than half of jobs, Table 1 2023 Jamaica has been a highly indebted econ- are vulnerable to external shocks, espe- Population, million 2.8 omy for decades. Since 2013, the Govern- cially climate-related ones, which could GDP, current US$ billion 18.8 ment (GOJ) has successfully implemented undermine growth and poverty reduc- GDP per capita, current US$ 6666.6 fiscal consolidation measures, reducing the tion. The financial sector is stable, well- a 0.3 International poverty rate ($2.15) public debt-to-GDP ratio by more than 60 capitalized, and profitable but also sus- a 2.4 percentage points to 75.5 percent in 2023 ceptible to various shocks. To strengthen Lower middle-income poverty rate ($3.65) a 13.9 – the lowest level in 25 years. Prudent fiscal, financial, and social resilience to Upper middle-income poverty rate ($6.85) Gini index a 40.2 macroeconomic management, anchored climatic shocks, Jamaica has been grad- School enrollment, primary (% gross) b 90.7 on debt reduction targets and inflation-tar- ually integrating climate change adapta- b 70.5 geting monetary policy with ample foreign tion into its policy framework. Further Life expectancy at birth, years reserves, facilitated post-pandemic recov- improving anti-AML/CFT framework and Total GHG emissions (mtCO2e) 9.5 ery amid challenging external environ- enhancing financial supervision is neces- Source: WDI, Macro Poverty Outlook, and official data. ment of inflationary pressures and tighten- sary to strengthen financial stability and a/ Most recent value (2021), 2017 PPPs. b/ WDI for School enrollment (2022); Life expectancy ing global financial conditions. A strength- attract private investment. Broader pro- (2021). ened social protection system provided motion of digital financial services will temporary assistance to vulnerable house- enhance financial inclusion. holds and businesses during the pandemic Structural and institutional reforms to offset income losses, protect jobs, and strengthened macroeconomic manage- stimulate demand. Additional assistance ment over recent years. This allowed the was provided to vulnerable households to Recent developments mitigate the impact of rising prices. government to respond to the pandemic However, fiscal consolidation adversely The Jamaican economy surpassed its pre- and inflation shocks without significantly affects growth while relatively high debt- pandemic level, expanding in real terms impairing fiscal sustainability and pover- service costs crowd out other government by 2.9 percent y-o-y in the first three spending, including capital investment, quarters of 2023. Growth was driven by ty reduction objectives. Jamaica’s real which is critical to boost growth. Jamaica net exports from a record expansion in GDP surpassed its pre-crisis level in has been among the slowest growing tourism and mining, while agriculture de- 2023, and poverty is gradually declining economies in LAC given its concentration clined due to an extended drought. Rising towards pre-crisis levels. Progress in low- in low productivity services, limited tech- economic activity brought the unemploy- ering public debt and reducing poverty nology adoption and innovation, a weak ment rate to a record-low 4.2 percent in business environment, high connectivity October 2023. Poverty ($6.85 per day) de- may be slower than expected if global eco- clined from 13.9 in 2021 to an estimated costs, and pervasive crime. Learning dis- nomic conditions deteriorate and if con- ruptions during the pandemic risk fur- 12.3 percent in 2023. The quality of em- straints to growth remain unaddressed. ther corrosive effects on growth, human ployment remains a concern given high FIGURE 1 Jamaica / Public debt and net international FIGURE 2 Jamaica / Actual and projected poverty rates and reserves real GDP per capita Percent of GDP Million US$ Poverty rate (%) Real GDP per capita (constant LCU) 160 8000 16 350000 140 7000 14 340000 120 6000 12 330000 100 5000 10 320000 80 4000 8 310000 60 3000 6 300000 4 290000 40 2000 2 280000 20 1000 0 270000 0 0 2021 2023 2025 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Lower middle-income pov. rate Upper middle-income pov. rate Public Debt Net International Reserves (rhs) Real GDP pc Sources: Bank of Jamaica, Ministry of Finance and the Public Service, and World Source: World Bank. Notes: see Table 2. Bank staff calculations. MPO 1 Apr 24 informality (46.8 percent of non-agricul- compensation cycle. To further de-dollar- offset by reduced spending on imports in tural employment in 2020) and fewer ize the public debt and mitigate foreign the context of lower commodity prices. average hours worked relative to pre- exchange risk, the GOJ issued its first Higher wages and the second phase of pandemic levels. domestic-currency international bond for the PPV fare increase in 2024 are antici- Annual inflation accelerated to 7.4 percent J$46.6 billion (US$300 million) in Novem- pated to continue to generate inflationary in January 2024 (5.1 percent in October ber 2023. In the context of prudent fiscal pressures in the near term, diminishing 2023) – above the Bank of Jamaica (BOJ)’s management and macroeconomic stabili- the purchasing power of households. BOJ reference range (5 ±1 percent). This was in- ty, Jamaica’s credit worthiness improved. is likely to maintain tight monetary policy fluenced by (i) a sharp increase in food The external position remained strong, while ensuring adequate liquidity in the inflation amid droughts, (ii) increased supported by robust earnings from financial system, minimizing pressures on public passenger vehicle (PPV) fares, (iii) tourism and remittances. The current ac- the currency, and returning inflation to its increases in telephone and internet rates, count recorded an estimated surplus of 2.5 target range by mid-2025. Poverty is pro- and (iv) a minimum wage increase of 44 percent of GDP in the first half of 2023. jected to continue a gradual decline as re- percent (over the previous rate as of Ju- Reserves remain adequate, at US$4.7 bn in al incomes improve. ly 2023) coupled with tighter labor mar- January 2024 (about 5.8 months of imports The fiscal account is expected to reverse ket. Persistent high food price inflation and 25 percent of GDP). In this context, the to surplus over the medium term as a (8.8 percent in January 2024) continued exchange rate remained relatively stable. result of improvements in tax revenue to undermine food security (33 percent and prudent spending. Spending is ex- of Jamaicans were severely food insecure pected to decline slightly due to lower in May 2023). The BOJ has kept the key interest payments. Public debt is project- policy rate at 7.0 percent since end-2022, Outlook ed to remain on a downward trajectory, maintained foreign currency interventions declining to 65.9 percent of GDP by 2026. to support the Jamaican dollar and price Annual growth is expected to average Gross reserves are expected to remain at stability, and tightened Jamaican dollar only 1.7 percent y-o-y over the medi- healthy levels. liquidity conditions. um term as global demand weakens Significant downside risks to the economic The GOJ sustained efforts in fiscal con- and fiscal austerity limits capital in- outlook include a possible deeper-than-ex- solidation while prioritizing social protec- vestments. Mining, tourism, and pri- pected global economic slowdown. Fur- tion. The fiscal stance was supported by vate investment in hospitality capacity ther tightening of financial market condi- strong tax revenues. However, the fiscal and infrastructure are expected to dri- tions could raise the cost of borrowing, account is estimated to have registered a ve growth. External account balances curtail private investments, and derail deficit of 1.4 percent of GDP in 2023 from are expected to slightly deteriorate as longer-term growth, climate change adap- a surplus of 1.6 percent in 2022 due to tourism and remittances growth is ex- tation, and debt objectives. Worsening increased spending on wages and salaries pected to slow amid weaker economic crime and natural hazards could also im- amid the recently approved three-year conditions in the US and UK, partially pair growth and poverty reduction. TABLE 2 Jamaica / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 4.6 5.2 2.6 2.0 1.6 1.6 Real GDP growth, at constant factor prices 4.6 5.2 2.6 2.0 1.6 1.6 Agriculture 8.3 9.0 -7.5 1.9 0.9 0.9 Industry 2.4 -0.4 5.9 2.5 1.4 1.4 Services 4.9 6.5 2.8 1.9 1.7 1.7 Inflation (consumer price index) 5.9 10.3 6.5 7.0 6.2 5.4 Current account balance (% of GDP) 1.0 -0.7 0.8 0.2 -0.8 -1.4 Net foreign direct investment inflow (% of GDP) 1.8 1.5 1.6 1.7 1.9 2.0 Fiscal balance (% of GDP) 0.0 1.6 -1.4 -0.4 -0.2 0.1 Revenues (% of GDP) 30.3 30.2 30.8 31.3 30.8 30.7 Debt (% of GDP) 100.5 83.5 75.5 70.8 68.9 65.9 Primary balance (% of GDP) 6.0 7.2 4.3 3.0 2.3 2.8 a International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.3 0.3 0.3 0.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.4 2.0 1.7 1.6 1.5 1.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 13.9 12.7 12.3 11.8 11.3 11.1 GHG emissions growth (mtCO2e) 9.8 7.0 4.2 3.1 1.8 1.8 Energy related GHG emissions (% of total) 77.8 79.2 79.9 80.5 80.8 81.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on CONLAC harmonization, using 2021-JSLC. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 2 Apr 24