Jamaica - Country at Alarming Economic Risk

ColideZ   Sweet Music Jamaica    Tech Life

In an earlier blog  "7 numbers every Jamaican should be concerned about" I highlighted some data and information points about the state of the Jamaican economy. Today I review those figures with some updated information. The situation has not budged  favorably, in fact it has gotten worse and as a result I feel the need to further highlight the facts and figures in an effort and hope to bring further attention to the matter. Hopefully maybe just maybe more Jamaicans will become more aware and sensitive to the present challenges we face and the critical implications for the future of Jamaicans between age groups 25 - 50.

Jamaica's Gross Domestic Product - JM$1,226.15 Billion

• Jamaica's GDP growth rate for 2011  - 2.2%
• Jamaica's rank on IMF's data of the worlds slowest growing economies - 7 th.

Total National Debt at end of 2011 - $1.63 trillion

Total Government Gross Debt as of September 2012 - JM$1,713.29 Billion

Growth of Debt:

• Growth rate of Jamaica's Total Internal Debt for 2011 - 8.55%
• Growth rate of Total Government Guaranteed External Debt between Mar 2010 - Feb 2011 - 18.75%

• 2012 debt growth rate - 5-6%
• Close to  $300  million per day

Jamaica is  ranked as the 2nd most indebted country in the world.

  

Rank	Country	2010 Gross Government Debt ($B)	% of GDP
1	Japan	12,009	220
2	Jamaica	19	143
3	Greece	436	143
4	Lebanon	53	134
5	Iraq	97	120
6	Italy	2,445	119
7	Belgium	452	97
8	Sinapore	214	96
9	Ireland	196	95
10	USA	13,707	94
11	Portugal	213	93
12	Icaeland	12	92
13	Germany	2,759	84
14	Canada	1,324	84
15	France	2,110	82
16	Hungary	105	80
17	Isreal	168	77
18	UK	1,699	76
19	Egypt	161	74
20	Austria	272	72
21	Sudan	47	72
22	Brazil	1,397	67
23	Jordan	18	67
24	Cote dIvoire	15	67
25	India	1,046	64
26	Netherlands	497	64
27	Cyprus	14	61
28	Spain	848	60
29	Uruguay	23	57
30	Pakistan	100	57

Source: International Monetary Fund (IMF)

National GDP growth rate 2.2% relative to the national debt growth rate 8.55% is to slow to curb unsustainable imbalance between government income and expenditures. The debt to GDP ratio (143% in 2010 - Possibly 160% by the end of 2012) will detrimentally continue to climb over the coming three to five year to an unbearable level.

A few things that will be a continuing economic trend in 2013 given the current national economic situation:

1. More Taxes: Debts must be repaid and the primary means for the government to pay these debts is through taxes. Jamaicans should brace for more and significant tax increases in 2013 should national debt growth rates continue to out pace GDP growth rate and government tax inflows growth rates. This is happening.
2. Lack of national financial resources to spend on public sector wages and national infrastructure: 
1. If there is no funds to finance public sector wages then one of or two things could happen. Public sector workforce will be cut or a salary freeze will be imposed for a meaningful period (the next 3-5 years). This will happen.
2. The quality of government services and facilities is diminishing. An over burdened public health sector is becoming the norm as a result of lack of resources. Poor quality roads will be the standard as there will soon be no funds to have them fixed. Roads outside of the corporate area have been deteriorating and continue to do so without abatement. Poor national security as the ability to provide resources to the security forces will be significantly constrained.

3. Devaluation of the Jamaican dollar: The more debt Jamaica has the less attractive the currency looks especially if NIR is being used to pay debt. The more the dollar devalues   the more expensive everything will become and technically leading to increased poverty. December 2011 - US$1:JM$86.75 -> November 2012 - US$1:JM$91.46. Devalued by 5.43% in the last yoy period.
4. Higher interest rates: If Jamaica is viewed as being less capable of repaying its debts by international rating firms, Jamaica could be down graded. If this happens higher interest rates could follow and as a result to cost of money will go up.   if this happen and history repeats itself Jamaicans may brace for further economic contraction. 

ColideZ   Sweet Music Jamaica    Tech Life