Jamaica is a mixed economy consisting of state-owned and private sector enterprises. The main sectors of the Jamaican economy are agriculture, mining, manufacturing, tourism, and financial and insurance services. Tourism and mining are the main foreign exchange earners. Half of Jamaica’s economy is service-based, with half of its income coming from services such as tourism. An estimated 1.3 million foreign tourists visit Jamaica every year.
Supported by the multilateral financial institutions, Jamaica has since the early 1980s attempted to implement structural reforms aimed at promoting private sector activity and strengthening the role of market forces in resource allocation. Since 1991, the government has pursued a programme of economic liberalisation and stabilisation by lifting exchange controls, floating the exchange rate, lowering tariffs, stabilising the Jamaican currency, reducing inflation and lifting restrictions on foreign investment. The emphasis was on maintaining strict fiscal discipline, greater openness to trade and financial flows, liberalising markets and reducing the size of government. During this period, much of the economy was returned to the private sector through disinvestment and privatisation programmes.
The macroeconomic stabilisation programme introduced in 1991, which focused on tight fiscal and monetary policies, contributed to a controlled reduction in the inflation rate. The annual inflation rate fell from a peak of 80.2% in 1991 to 7.9% in 1998. Inflation for the 1998-1999 financial year was 6.2%, compared to 7.2% for the corresponding period in the 1997-1998 financial year. The Government of Jamaica remains committed to reducing inflation, with the long-term objective of bringing it in line with inflation in its major trading partners.
After a period of steady growth from 1985 to 1995, real GDP declined by 1.8% and 2.4% in 1996 and 1997 respectively. The decline in GDP in 1996 and 1997 was largely due to significant problems in the financial sector and in 1997 to a severe island-wide drought (the worst in 70 years) which significantly reduced agricultural production. In 1997, nominal GDP was approximately J$220,556.2 million (US$6,198.9 million at the average annual exchange rate for the period).
The economy in 1997 was characterised by low import growth, high private capital inflows and relative stability in the foreign exchange market.
Recent economic developments show that the Jamaican economy is recovering. Agricultural production, a major engine of growth, increased by 15.3% in the third quarter of 1998 over the corresponding period in 1997, signalling the first positive growth rate in the sector since January 1997. Bauxite and alumina production increased by 5.5% from January to December 1998 over the same period in 1997. January bauxite production was 7.1% higher than in January 1998 and Alcoa expects further expansion in alumina production by 2009. Jamaica is the world’s fifth largest exporter of bauxite, after Australia, China, Brazil and Guinea. Tourism, the main source of foreign exchange, has also improved. In the third quarter of 1998, growth in tourist arrivals accelerated, resulting in an overall 8.5% increase in tourism receipts in 1998 over the corresponding period in 1997. Jamaica’s agricultural exports are sugar, bananas, coffee, rum and sweet potatoes.
Jamaica has a wide variety of industrial and commercial activities. The aviation industry is capable of performing most routine maintenance on aircraft, with the exception of heavy structural repairs. There is a considerable amount of technical support for transport and agricultural aviation. Jamaica has a significant amount of industrial engineering, light manufacturing, including metal fabrication, metal roofing and furniture manufacturing. Food and beverage processing, glassware manufacturing, software and data processing, printing and publishing, insurance, music and recording industries, and higher education are found in the larger urban areas. The Jamaican construction industry is fully self-sufficient and has professional technical standards and advice.
Since the first quarter of 2006, the Jamaican economy has experienced a period of sustained growth. With an inflation rate of 6 per cent for the 2006 calendar year and an unemployment rate of 8.9 per cent, nominal GDP growth was an unprecedented 2.9 per cent. A programme of investment in the island’s transport and utilities infrastructure, as well as increases in tourism, mining and services, contributed to this figure. All forecasts for 2007 show even higher potential for economic growth, with all estimates above 3.0 per cent, hampered only by urban crime and government policies.
In 2006, Jamaica joined the CARICOM Single Market and Economy (CSME) as a pioneer member.
The global economic downturn had a significant impact on the Jamaican economy between 2007 and 2009, resulting in negative economic growth. The government introduced a new debt management initiative, the Jamaica Debt Exchange (JDX), on 14 January 2010. Under this initiative, holders of Government of Jamaica (GOJ) bonds were to exchange these high-yielding instruments for lower-yielding bonds with longer maturities. The offer was accepted by over 95% of local financial institutions and was deemed a success by the government. Due to the success of the JDX programme, the Bruce Golding-led government was able to conclude a loan agreement with the IMF for US$ 1.27 billion on 4 February 2010. The loan agreement has a term of three years.
In April 2014, the governments of Jamaica and China signed the preliminary agreements for the first phase of the Jamaican Logistics Hub (JLH) – the initiative that will position Kingston as the fourth hub in the global supply chain, alongside Rotterdam, Dubai and Singapore, serving the Americas. When completed, the project is expected to create numerous jobs for Jamaicans, economic zones for multinational companies and much needed economic growth to reduce the country’s high debt to GDP ratio. Strict adherence to the IMF refinancing programme and preparations for the project have had a positive impact on Jamaica’s credit rating and outlook with the three major rating agencies.