Jamaican economy remains stable, but IFC concerned about gov't underspending

The Independent Fiscal Commission (IFC) says Jamaica’s macroeconomic environment remained broadly stable in the 2024/25 financial year (FY) and the for the first quarter of this fiscal year, but it has flagged the Government for under execution in capital spending across the Specified Public Sector while highlighting revenue challenges.

It said only $20.1 billion was spent in the first quarter of FY 2025/26, compared with a budgeted amount of $40.5 billion.

The IFC cautioned that this underspending, particularly on infrastructure projects, poses risks to much needed economic growth.

The Commission acknowledged progress in areas such as updating the System of National Accounts (SNA), reducing informality through digitalisation of services and improving the Public Investment Management System. However, it said gaps remain, particularly in relation to public sector compensation negotiations and comprehensive reporting on the Specified Public Sector, as required by law.

In the meantime, the IFC, in its Statement on Fiscal Performance (SFP) report said inflation stood at 3.8 per cent in June 2025, below the Bank of Jamaica’s target range, while unemployment fell to a record low of 3.3 per cent in April 2025. Real Gross Domestic Product (GDP) was estimated to have grown by 1.4 per cent, though it said geopolitical headwinds threaten to slow recovery.

It noted that a key development was the Statistical Institute of Jamaica’s adoption of the 2008 SNA, which increased Jamaica’s nominal GDP by approximately 8 per cent on average. This revision lowered the debt-to-GDP ratio to 62.4 per cent at March 2025, positioning Jamaica to achieve its legislated debt target of 60 per cent two years ahead of schedule.

The Central Government primary surplus exceeded targets for FY 2024/25 and the April–June 2025 period, while the overall fiscal deficit of $12.6 billion for the Specified Public Sector was significantly below projection.

However, the IFC said revenue challenges remain as a $14.2 billion tax shortfall at the end of FY 2024/25 overstated the base for FY 2025/26, implying that additional revenue efforts might be required to meet the budgeted amount.

It added that since the preparation of the SFP, there have been noteworthy improvements in macro-fiscal outcomes. Specifically, the economy expanded by 1.6 per cent during the June 2025 quarter, inflation fell to 1.2 per cent at August 2025 (the lowest point-to-point inflation in nearly 60 years), and unemployment held steady at 3.3 per cent in July.

Additionally, it said there was an uptick in tax revenue for the fiscal year to August.

The IFC said it will undertake a deeper assessment of macro-fiscal performance for the first half of the fiscal year, as well as the outlook for the remainder of FY 2025/26 and the medium-term, following the Government’s tabling of the Interim Fiscal Policy Paper, expected in October.

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