So is Jamaica in a recession or not?
There’s been a heated debate about whether or not Jamaica is in a recession.
There’s one group saying yes! We’ve had two consecutive quarters of negative growth. And there’s another group saying- no, it's not that simple.
So who’s right? Let’s start with the official data.
According to projections from the Planning Institute of Jamaica (PIOJ), Jamaica’s economy declined by three point five percent between July and September. And the economy declined another one point eight percent between October and December.
Now, we’ve always heard that two straight quarters of economic decline, meaning the country spent more money than it earned, means a recession.
But the Head of the PIOJ, Dr Wayne Henry, says there’s more to it than just that and Jamaica is not in a recession.
So we turned to one of my favourite online resources, Investopedia, for an official definition.
According to Investopedia, a recession is a significant, widespread, and prolonged downturn in economic activity. And while a common rule of thumb is that two consecutive quarters of negative GDP growth indicate a recession, more complex formulas are also used to determine recessions.
The US National Bureau of Economic Research measures recessions by looking at nonfarm payrolls, industrial production, and retail sales, among other indicators.
So let’s look at some of those other indicators.
According to Statin’s latest numbers, Jamaica’s unemployment rate is at a historic low of three point five percent. Meanwhile, Mining and Quarrying and Manufacturing, which are two of the island's key performance indicators, were up eight percent and half a percent in December, compared to the same period in 2023.
So what Dr Henry is saying is that when you take a look at the big picture, Jamaica’s two-quarters of negative growth don’t tell the full story.
He said the decline can be explained by the extensive damage caused by Hurricane Beryl in July and then Tropical Storm Rafael in November. And those shocks were temporary, not prolonged and widespread.
He also said a recession is usually accompanied by a steady rise in job losses, which is not the case in Jamaica.
All these are indicators that the economy will rebound in the short to medium term.
However, the Bureau of Economic Research also warns that some recessions' impacts are not always evident when they first begin, so many are actually called retroactively.
I think it will be interesting to see the numbers for this January to March quarter 2025.
And that’s the bottom line.