Jamaica suffered through decades of stagnant growth and growing debt. That said, Jamaica has finally found its way to economic growth and stability, and has made great progress according to a recent report by the International Monetary Fund (IMF).
In 2013, the IMF gave Jamaica a four-year loan to assist it with significant economic structural reforms. The IMF-backed reform program has proven to be the turning point for the Jamaican economy. It was based on a strong focus of private ownership and collaboration recommended by the IMF as a means of breaking a cycle of debt and stagnation that had lasted for decades.
Recovery continues for the Caribbean island nation, but the IMF fears it may not be fast enough. The International Monetary Fund feels Jamaica can do better, but needs to make bold reforms to do it. In its last assessment, the IMF predicted that Jamaica would only achieve a 1.7% rate of growth for 2016 and 2017. While any growth is better than the stagnation the country had dealt with for decades, it is modest compared to other developing economies.
The cycle Jamaica experienced for decades involved deficit spending, excessive public borrowing, and a series of financial sector bailouts. This left the nation with an ever-growing pile of debt it simply could not escape, and the standard of living dropped. The problem was further exacerbated by a series of hurricanes that caused millions of dollars in damage.
Many economists doubted that Jamaica could ever climb out of its stagnation and saw the IMF’s proposed program impossible to achieve. The IMF plan called for aggressive growth that seemed beyond the reach of the island nation. The IMF praised Jamaica’s dedication in its report; however, as the country managed to reach over 95% of the conditions of the program it created.
After three years of the IMF program, inflation in Jamaica is at an historic low, business confidence is at new highs, and public debt has dropped more than 18% of gross domestic product (GDP). This has improved the nation’s credit rating and made it possible to consolidate some of its debt at better rates.
Despite all of these steps in the right direction, the IMF believes Jamaica still has a lot of work to do. The report said growth remained unacceptably low and job creation needed improvement. To that end, the IMF identified five key areas for improvement. These included improving bank sector competition and tax laws, reducing the size of the public sector, reducing red tape, improving the labor market, and tackling the excessively high crime rate.
The IMF report concludes on a positive note, asserting that if the nation can implement these five changes, it believes Jamaica will be able to dramatically increase its growth and achieve economic improvements once believed impossible.