JAMAICA’S economic fallout from the novel coronavirus disease (COVID-19) was yesterday described by Minister of Finance and the Public Service Dr Nigel Clarke as a “double whammy”, calling the hit the most significant economic challenge in the nation’s history.
The double blow, the minister told the House of Representatives, comes from the combination of a $120-billion bill from the impact of the COVID-19 pandemic, and a projected $81-billion loss in revenues and grant flows, critical to keeping the economy afloat, for at least the rest of the 2020/21 fiscal year.
The first supplementary estimates for 2020/21, which Dr Clarke tabled yesterday in the House, showed a dramatic fall in capital expenditure from $74.2 billion to $46 billion, but an increase of some $15 billion in recurrent expenditure. The total for the year is now projected at $838 billion, compared to the $853.3 billion which was projected in the earlier budget.
Dr Clarke told the House that, fortunately, Jamaica has options that other countries do not have, and the Government has been exercising those options, inclusive of the deployment of $70 billion of cash resources on hand. However, he said that even with that, a growth income of minus 5.1 per cent with a reduced primary balance of 3.5 per cent will mean that the debt-to-GDP (gross domestic product) ratio is estimated to rise to just under 98 per cent by March next year.
“The Great Lockdown of 2020, as the IMF [International Monetary Fund] has called it, has exceeded the Great Recession of 2008/2009 in scale and scope, and will lead to the worst economic recession since the Great Depression in the 1930s,” the minister told the House.
The supplementary estimates for the full 12 months of 2020/21 forecast government revenues and grant flows to be $81 billion or 12.3 per cent lower than the approved estimates. This reduction would be mainly from tax revenue, which is estimated to decline by 13.4 per cent, while non-tax revenue is estimated to decline by $2.3 billion or 3.4 per cent.
Minister Clarke noted that preliminary revenue estimates for April have suggested that tax and Customs revenue for the first month of the 2020/21 fiscal year declined by approximately 18 per cent, vis–vis the approved budget. But he said that the preliminary estimate could be further revised.
At the same time, he said the absorption of the $120-billion adjustment is to be achieved through: (i) the use of cash resources of approximately $70 billion, which was originally earmarked for debt reduction; and (ii) the reduction in approved expenditure of approximately $50 billion.
In terms of growth, he said that the Government is forecasting a GDP outturn of minus 5.1 per cent for 2020/21, based on available information. He said too that the growth outcome will inevitably have an impact on the revenue that is used to finance expenditure.
Opposition spokesman on finance Mark Golding agreed that he did not think that Jamaica has faced anything as shocking as this particular crisis.
“It has hit us in so many ways, and I think that all Jamaicans want to see their leaders pulling together and cooperating,” he said.
“I think that at this point in time we have to, and we will continue to try to adjust our own approach to this, with the natural priority of unity very much in mind,” Golding added.
The estimates are to be reviewed by the Public Administration and Appropriations Committee (PAAC) in time to be debated in the House of Representatives next Tuesday.
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