01.03.07. Prevalence of the informal economy | Jamaica

01.03.07. Prevalence of the informal economy | Jamaica

25 Sep 2022

Research spearheaded by the Inter-American Development Bank (2006) on the informal economy in Jamaica (the informal economy referring to pure tax evasion, the irregular economy, and illegal activities) found that these activities represented 40% of the official GDP in 2001. This growth  is considered to have contributed significantly to the decline in poverty during that decade.

It is important to note that this growing sector represents a diverse group of enterprises and workers in Jamaica, ranging from small-farm workers, retail sale people, street vendors, domestic helpers, taxi drivers, and local peddlers to fairly sophisticated small to medium entrepreneurs, as well as to illicit drug farmers and transport providers. Persons engaged in this sector often are unable to access pensions, social support, or insurance in later life (Jamaica Gleaner, 2016).

COVID-19 and the Informal Economy

Applicants of the Compassionate Grant programme, who receive a one-time payment of J$10,000.00, accounted for over 83% of the total CARE programme applications. Programme eligibility includes the unemployed (not laid-off due to COVID-19), informally employed, older people and students over 18 (CARE Brochure, 2020). Speaking to the large number of applicants for this component of the CARE Programme, the Minister of Finance, Nigel Clarke asserted that Jamaica’s economy is largely informal, which depends on meeting people physically for goods and service in exchange for cash payment. As a result, physical distancing will disproportionately affect the informal economy (Jamaica Observer, 2020).

Table 7. Summary of Jamaica’s Economic Performance

  Unit FY 2017/18 (Actual) FY 2018/19 (Actual) FY 2019/20 (Projection)
Real GDP Growth Rates % 1 2 0.6
Inflation (Annual Pt to Pt) % 3.9 3.4 5
BOJ Policy Rate (e-o-p) % 2.75 1.25  
Unemployment Rate (October Labour Force Survey) % 10.5 8.7 7.2
Exchange Rate (weighted average selling rate) J$=US$1 127.97 130.58  
Treasury Bill (average 6-month) % 3.17 2.17  
Current Account % of GDP -3 -2.3 -2.9
Net International Reserves (NIR), (e-o-p) US$mn 3,074.50 3,084.80 3,029.40
Gross Reserves (Goods & Services Imports) Weeks 23.3 22.9 22.2
Fiscal Accounts        
Central Government Primary Balance %GDP 7.5 7.5 6.5
Central Government Fiscal Balance %GDP 0.5 1.2 0
Public Bodies Overall Balance %GDP -0.3 0.1 0.1
Specified Public Sector Balance %GDP 0.2 1.3 0.1
Debt Stock %GDP 101.3 94.4 91.5


Source: Ministry of Finance, Fiscal Policy Paper, 2020-2021


Government of Jamaica. (2020). Fiscal Policy Paper 2020-2021. Ministry of Finance and the Public Service. Available from: https://www.mof.gov.jm/wp-content/uploads/fiscal-policy-paper-2020-21-140220.pdf

Jamaica Observer. (2020, May 14). JHTA working with Gov’t to resolve SET Cash programme delays – Jamaica Observer. https://www.jamaicaobserver.com/news/jhta-working-with-govt-to-resolve-set-cash-programme-delays/

Ministry of Finance and Public Service. (2020). CARE: COVID-19 Allocation of Resources for Employees. https://jis.gov.jm/media/2020/04/CARE-Brochure-Ministry-of-Finance-2020.pdf