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- GDP (PPP):
- $25.2 billion
- 0.1% growth
- -0.8% 5-year compound annual growth
- $9,159 per capita
- Inflation (CPI):
- FDI Inflow:
Jamaica’s economic freedom score is 66.7, making its economy the 56th freest in the 2014 Index. Its score is essentially unchanged from last year, with combined improvements in five of the 10 economic freedoms, including labor freedom and the control of government spending, offset by declines in financial freedom and fiscal freedom. Jamaica ranks 10th out of 29 countries in the South and Central America/Caribbean region.
Over the 20-year history of the Index, Jamaica has advanced its economic freedom score by only 2.3 points. Regulatory efficiency, measured through business freedom, labor freedom, and monetary freedom, has improved notably, and both trade freedom and investment freedom have recorded double-digit improvements. Counterbalancing these gains, however, have been substantial deteriorations in the rule of law, as assessed by property rights and freedom from corruption, and financial freedom.
Jamaica’s critical development challenges include lingering corruption and relatively high government spending. Public debt has surpassed 145 percent of GDP. Reducing the bloated public sector, following through on plans to privatize loss-making state-owned enterprises, and enforcing expenditure restraint are all essential in order to meet fiscal targets.
Prime Minister Portia Simpson-Miller’s People’s National Party was re-elected in December 2011 with a large parliamentary majority. In her second term, Simpson-Miller has maintained market-friendly policies, but high interest rates and excessive government debt burden the economy. A $1.27 billion standby agreement with the International Monetary Fund for balance of payment support, signed in 2010, required a commitment to major fiscal reforms that have been slow to materialize. An extended IMF agreement was approved in 2013. Services account for more than 60 percent of GDP. Most foreign exchange comes from remittances, tourism, and bauxite production, all of which declined sharply in the 2009 recession. Tourism receipts have recovered slightly, but unemployment and underemployment in the formal sector remain high. Violent crime and the drug trade remain serious problems.
Corruption remains a serious problem, and many citizens view the police as endemically corrupt. Jamaica has one of the Western Hemisphere’s highest murder rates, driven in part by drug trafficking. An inefficient legal system weakens the security of property rights and the rule of law. The judiciary lacks adequate resources, and trials can be delayed for years. The Trinidad-based Caribbean Court of Justice is the highest appellate court.
The top individual income tax rate is 25 percent, and the top corporate tax rate is 33.3 percent. Other taxes include a property transfer tax and a general consumption tax. The overall tax burden is 23.4 percent of gross domestic income. Government spending amounts to 32 percent of gross domestic output. Public debt is high at over 145 percent of GDP, and the government has had to seek IMF assistance.
The business start-up process is straightforward, with no minimum capital required, but obtaining necessary licenses still takes more than four months and costs over 200 percent of the level of average annual income. Rigid employment regulations are not conducive to job growth. Most prices are set by the market, but the government regulates the prices of a number of goods and services.
Tariffs average 7.5 percent and are a significant source of revenue. Some agricultural products face higher tariffs. There are few legal barriers to foreign investment, but bureaucratic red tape can discourage investors. The financial system continues to grow. However, while the overall banking sector appears to be sound, its excessive exposure to public debt, which represents about 20 percent of total assets, is a serious weakness.