The Jamaican economy is on pace to grow 2% in the 2016-2017 fiscal year, after the Caribbean country registered its strongest economic growth in a single quarter in seven years, Finance Minister Audley Shaw said.
Jamaica’s GDP expanded 2.3% during the July to September quarter, marking its fastest pace since 2007, Shaw said at LatinFinance’s 2nd Caribbean Investment and Finance Forum in Montego Bay, Jamaica.
“We should achieve a 2% growth rate in this fiscal year based on the latest quarter and what we’ve seen this year,” he said.
Jamaica’s Prime Minister Andrew Holness has set a goal of boosting Jamaica’s growth rate to 5% within four years. The economy last grew at those rates in the 1980s. In 2016, Jamaica’s GDP expanded by 1.5%, according to the International Monetary Fund (IMF).
Shaw said steps taken by the government have helped to improve the economy’s performance. Last year, Jamaica and the IMF reached an agreement to make $1.7bn available to the country for three years. Shaw called the agreement an “insurance policy” against potential external shocks such as a jump in the price of oil or an unexpected natural disaster. He also cited Jamaica’s $3bn in foreign currency reserves as strong foundations for growth to continue.
“We have record foreign exchange reserves, access to an insurance policy of almost $1.7bn from the IMF – the macroeconomic numbers are lining up in the right direction,” he said.
Jamaica has one of the world’s highest debt loads but has cut debt to 120% of GDP from 145% four years ago. The government has set a goal to get it down to 96% by 2020, Shaw said.
Shaw said he was worried about the loss of correspondent banking relationships and its impact on the economy. Like other financial institutions in Latin America and the Caribbean, some Jamaican banks have lost these banking relationships, which allow lenders to take deposits or make payments on behalf of foreign institutions.
“The decline in the correspondent banking relationships is a worrying trend to the sustainable development in the region,” he said, adding it poses a risk to remittances and foreign investment, critical drivers of economic growth.
“The conundrum, however, is, rather than reducing risk in the global financial sector, de-risking actually runs the risk or contributes to increased vulnerability,” he said.