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World > North America > Jamaica > Economy (Notes)

Jamaica - Economy (Notes)


ECONOMY
Jamaica has natural resources, primarily bauxite, adequate water supplies, and climate conducive to agriculture and tourism. The discovery of bauxite in the 1940s and the subsequent establishment of the bauxite-alumina industry shifted Jamaica's economy from sugar and bananas. By the 1970s, Jamaica had emerged as a world leader in export of these minerals as foreign investment increased. The country faces some serious problems but has the potential for growth and modernization. Currency reserves, remittances, tourism, agriculture, mining, construction, and shipping all remain strong, and Jamaica has attracted over U.S. $4.4 billion in foreign direct investment over the past decade. However, high unemployment, burdensome debt, an alarming crime rate, and anemic growth continue to darken the country?s prospects. After 4 years of negative economic growth, Jamaica's GDP grew by 0.8% in 2000, and has grown in the 0.5% to 2.5% range, year-on-year, since then. Inflation fell from 25% in 1995 to 6.1% in 2000 and has mostly registered single digits since then, including calendar year 2006, which saw the lowest rate in 18 years, at 5.8%.

Through periodic intervention in the market, the central bank prevents any abrupt drop in the exchange rate. Nevertheless, the Jamaican dollar continues to slip despite intervention, resulting in an average exchange rate of J$68.15 to the U.S. $1.00 by May 2007.

Weakness in the financial sector, speculation, and low levels of government investment erode confidence in the production sector. The government is unable to channel funds into social and physical infrastructure because of an overwhelming debt-to-GDP ratio, which currently stands at approximately 135%. Almost 60 cents on every dollar earned by the Jamaican Government goes to debt servicing and recurrent expenditure. Tax compliance rates also contribute to the problem, hovering at approximately 45%. On the other hand, net internal reserves remain healthy, at $2.3 billion at the end of 2006.

Jamaican Government economic policies encourage foreign investment in areas that earn or save foreign exchange, generate employment, and use local raw materials. The government provides a wide range of incentives to investors, including remittance facilities to assist them in repatriating funds to the country of origin; tax holidays which defer taxes for a period of years; and duty-free access for machinery and raw materials imported for approved enterprises.

Free trade zones have stimulated investment in garment assembly, light manufacturing, and data entry by foreign firms. However, over the last 5 years, the garment industry has suffered from reduced export earnings, continued factory closures, and rising unemployment. This can be attributed to intense international and regional competition, exacerbated by the high costs of operations in Jamaica, including security costs to deter drug activity, as well as the relatively high cost of labor. The Government of Jamaica hopes to encourage economic activity through a combination of privatization, financial sector restructuring, falling interest rates, and by boosting tourism and related production activities.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions - Jamaican Dollar Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions
Jamaican Dollar Exchange Rates


Notes and Commentary
People
Economy
Government and Political Conditions
Foreign Relations
Relations with U.S.





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