| Jamaica is a mixed, free-market economy | | | | and tourism earnings, increased 8.5% |
| with state enterprises as well as | | | | from January to December 31, 1998 |
| private sector businesses. Major sectors | | | | compared to the corresponding period in |
| of the Jamaican economy include | | | | 1997. Paul Pennycooke is now the |
| agriculture, mining, manufacturing, | | | | Director of Tourism for the island. |
| tourism and financial and insurance | | | | Jamaica has natural resources, primarily |
| services. Tourism and mining are the | | | | bauxite, and an ideal climate conducive |
| leading foreign exchange earners. | | | | to agriculture and tourism. The |
| Supported by multilateral financial | | | | discovery of bauxite in the 1940s and |
| institutions, Jamaica has, since the | | | | the subsequent establishment of the |
| early 1980's, sought to implement | | | | bauxite-alumina industry shifted |
| structural reforms aimed at fostering | | | | Jamaica's economy from sugar and |
| private sector activity and increasing | | | | bananas. By the 1970s, Jamaica had |
| the role of market forces in resource | | | | emerged as a world leader in export of |
| allocation. Since 1991, the Government | | | | these minerals as foreign investment |
| has followed a program of economic | | | | increased. |
| liberalisation and stabilisation by | | | | The country faces some serious problems |
| removing exchange controls, floating the | | | | but has the potential for growth and |
| exchange rate, cutting tariffs, | | | | modernization. The Jamaican economy |
| stabilising the Jamaican currency, | | | | suffered its fourth consecutive year of |
| reducing inflation and removing | | | | negative growth (0.4%) in 1999. In 2000, |
| restrictions on foreign investment. | | | | Jamaica may have experienced its first |
| Emphasis has been placed on maintaining | | | | year of positive growth since 1995. All |
| strict fiscal discipline, greater | | | | sectors excepting bauxite/alumina, |
| openness to trade and financial flows, | | | | energy, and tourism shrank in 1998 and |
| market liberalisation and reduction in | | | | 1999. This reduction in aggregate demand |
| the size of government. During this | | | | and output is the result of the |
| period, a large share of the economy was | | | | government's continued tight |
| returned to private sector ownership | | | | macroeconomic policies. In part, these |
| through divestment and privatisation | | | | policies have been successful. Inflation |
| programmes. | | | | has fallen from 25% in 1995 to 6.1% in |
| The macroeconomic stabilisation | | | | 2000. Through periodic intervention in |
| programme introduced in 1991, which | | | | the market, the central bank also has |
| focused on tight fiscal and monetary | | | | prevented any abrupt drop in the |
| policies, has contributed to a | | | | exchange rate. The Jamaican dollar has |
| controlled reduction in the rate of | | | | been slipping, despite intervention, |
| inflation. The annual inflation rate has | | | | resulting in an average exchange rate of |
| decreased from a high of 80.2% in 1991 | | | | J$43.5 to the US$1.00 (2000). |
| to 7.9% in 1998. inflation for FY1998/99 | | | | Weakness in the financial sector, |
| was 6.2% compared to 7.2% in the | | | | speculation, and lower levels of |
| corresponding period in FY1997/98. The | | | | investment erode confidence in the |
| Government remains committed to lowering | | | | productive sector. The government |
| inflation, with a long-term objective of | | | | continues its efforts to raise new |
| bringing it in line with that of its | | | | sovereign debt in local and |
| major trading partners. | | | | international financial markets in order |
| After a period of steady growth from | | | | to meet its U.S. dollar debt |
| 1985 to 1995, real GDP decreased by 1.8% | | | | obligations, to mop up liquidity to |
| and 2.4% in 1996 and 1997, respectively. | | | | maintain the exchange rate and to help |
| The decrease in GDP in 1996 and 1997 was | | | | fund the current budget deficit. |
| largely due to significant problems in | | | | Jamaican Government economic policies |
| the financial sector and, in 1997, a | | | | encourage foreign investment in areas |
| severe island-wide drought (the worst in | | | | that earn or save foreign exchange, |
| 70 years) that drastically reduced | | | | generate employment, and use local raw |
| agricultural production. In 1997, | | | | materials. The government provides a |
| nominal GDP was approximately | | | | wide range of incentives to investors, |
| J$220,556.2 million (US$6,198.9 million | | | | including remittance facilities to |
| based on the average annual exchange | | | | assist them in repatriating funds to the |
| rate of the period). | | | | country of origin; tax holidays which |
| The economy in 1997 was marked by low | | | | defer taxes for a period of years; and |
| levels of import growth, high levels of | | | | duty-free access for machinery and raw |
| private capital inflows and relative | | | | materials imported for approved |
| stability in the foreign exchange | | | | enterprises. Free trade zones have |
| market. | | | | stimulated investment in garment |
| Recent economic performance shows the | | | | assembly, light manufacturing, and data |
| Jamaican economy is recovering. | | | | entry by foreign firms. However, over |
| Agricultural production, an important | | | | the last 5 years, the garment industry |
| engine of growth increased 15.3% in | | | | has suffered from reduced export |
| third quarter of 1998 compared to the | | | | earnings, continued factory closures, |
| corresponding period in 1997, signalling | | | | and rising unemployment. This may be |
| the first positive growth rate in the | | | | attributed to intense competition, |
| sector since January 1997. Bauxite and | | | | absence of NAFTA parity, drug |
| alumina production increased 5.5% from | | | | contamination delaying deliveries, and |
| January to December, 1998 compared to | | | | the high cost of operation, including |
| the corresponding period in 1997. | | | | security costs. The Government of |
| January's bauxite production recorded a | | | | Jamaica hopes to encourage economic |
| 7.1% increase relative to January 1998. | | | | activity through a combination of |
| Tourism, which is the largest foreign | | | | privatization, financial sector |
| exchange earner, showed improvement as | | | | restructuring, reduced interest rates, |
| well. Growth in tourist arrivals | | | | and by boosting tourism and related |
| accelerated in the third quarter of 1998 | | | | productive activities. |