Question 1

Jamaica's Current Account Balance

Jamaica's current account averaged US$-65.94M from 1987 until 2020, reaching an all-time high of US$153.47M in the first quarter of 2016 and a record low of US$-536.06M in the third quarter of 2012. The country recorded a current account surplus of US$53.64M in the fourth quarter of 2020. At present, Jamaica ranks 83rd out of a group of 172 countries being tracked by the World Bank in terms of current account balance. This is 27 places above the position seen 10 years ago.

The current account is one of two primary components of the balance of payments. As a per cent of GDP, it provides an indication of the level of international competitiveness of a country. Usually, countries recording a strong current account surplus have economies which are heavily dependent upon exports revenues and have high savings ratings but weak domestic demand. On the other hand, countries recording a current account deficit have strong imports, low saving rates and high personal consumption rates as a percentage of disposable income.

1. Define the following terms:
   1. balance of payments ii.current account deficit

iii.current account surplus (6 marks)

1. The scenario states, "The current account is one of two primary components of the balance of payments." Identify the other component. (2 marks)

1. i. Explain how a low savings rate can contribute to a country's current account deficit.

(4 marks)

1. Recommend TWO (2) measures the government could implement to reduce the country's importation levels. (4 marks)

1. Suggest ONE (1) reason for the current account surplus recorded in 2020. (4 marks)