News Brief No. 01/132

News Brief: Jamaica Revises Targets Under the Staff-Monitored Program

December 18, 2001

The Jamaican authorities have revised the macroeconomic targets under their Staff-Monitored Program (SMP)¹ for 2001-2002 to take account of recent economic shocks.

Over the past months, the Jamaican authorities and the staff of the IMF have been pursuing a close dialogue on policies designed to consolidate macroeconomic stability and regain the momentum for higher growth. All quantitative targets under the SMP for end-September 2001 were met, with the economy growing at an annual rate of 3 percent—its highest level for seven years—partly reflecting a rebound in agricultural output and a recovery in mining. However, a decline in tourism after the tragic September 11 attacks in the United States, and the floods caused by hurricane Michelle, which damaged around one fifth of Jamaica's crop acreage, have adversely affected the economy. Tourism revenues are expected to decline by 12 percent in the fiscal year through March 2002, the current account deficit to widen to about 8 percent from 5.3 percent, and unemployment to rise. The authorities now expect GDP growth to decline to 1½ percent from the 3 percent initially projected under the SMP.

The government is facing a deterioration in the fiscal situation, owing partly to extra spending on security, tourism promotion and flood relief, as well as lower revenues on account of a decline in economic activity. The government aims to contain the widening of the fiscal deficit to a new target of 4.1 percent of GDP from an original target of 2.8 percent. The authorities have pledged to keep social safety net expenditures unchanged.

Jamaica is committed to maintaining the progress achieved so far under the program and to continuing their fiscal adjustment efforts to reduce the heavy public sector debt burden. IMF staff will continue to monitor the implementation of the SMP.