Delroy Warmington | Has the Economic Growth Council failed Jamaica?
Did the Economic Growth Council (EGC) grow the economy? The answer is a resounding NO. We must commend the EGC for their appetence to serve their country. They deserve a lot of approbation. I was one of those who put them on a pedestal.
Regardless of their accomplishments, when it comes to the most important criterion, growing the gross domestic product (GDP) has been an abject failure. It should be reconstituted as the Economic Council. Really, is one per cent growth the best the economy can do?
One was hoping this was Jamaica’s Eureka moment. There were elevated expectations with a slope of enlightenment. However, this turns into a thought of disillusionment and an epoch of diminishing prospects. Then we are bombarded with a litany of excuses. Was this a mirage? Whichever way you slice the narratives, the EGC has been abysmal when it comes to growing the GDP. The question one needs to ask is, how much worse would the GDP growth be without the EGC?
Given the ineptitude of previous People’s National Party (PNP) administrations in running the economy, any government should exceed their performance. One would hope that one per cent growth, which was the apex of the PNP, would be the nadir for the Jamaica Labour Party (JLP). However, it seems that the JLP has also accepted one per cent growth as its apex.
Granted, the EGC inherited a comatose economy that was also constipated. It was stagnant like a pond, rather than flowing like a stream. But the efficacy of the prescript being proffered by the EGC is ephemeral and altruistic. It is not anodyne. This will never cure the ills of the Jamaican economy nor get us the five per cent growth. It will not make up for the over 30 years of underperformance. A forensic analysis of the economy will show that its true potential is north of five per cent.
It would be nice if the EGC tells us how they arrived at five per cent growth. What are the attributions? Show us the waterfall. We were promised five per cent growth in four years, but what we got was one per cent growth in four years. We are likely to have only one per cent growth in five years. This year will be another annus horribilus.
In the fifth year, we are closer to one per cent than five per cent. The EGC had 16 quarters to make adjustments to their forecast. What were these adjustments? Obviously, if there were any they did not work.
WHY WAS THE TARGET MISSED?
Yes, missing targets are bad, but missing by such a wide margin is unacceptable. Remember, it was the EGC that sets it own targets. By missing the growth target by a lacuna as wide as the Pacific Ocean, the EGC has provoked a cascade of deserved criticism. What the country needed was a puritanical devotion to GDP growth, but what we got was benign neglect. For reasons which may eludes discovery, the EGC has not justified why they missed their five per cent GDP growth target.
No one is saying that growing the economy is outside their cognitive map. What we need from them is some illuminated intellectual wattage.
When it comes to growing the economy, our beloved prime minister, distinguished minister of finance and the illustrious EGC are engaging in verbal gymnastics. They are producing a quaver that gives this utterance a staccato quality, like a needle skipping over a warped record.
We have a global GDP growth of 3.8 per cent and emerging market of 5.1 per cent. Jamaica has significantly underperformed against these. Greece is projected to grow three per cent in 2020. Remember, the Greek economy was in worse shape than Jamaica. So, there is no excuse for the Jamaica economy to be growing only at one per cent.
The next time the chairman and the CEO of the EGC go to Jamaica House for their photo op to assign blame, someone should hand them a mirror. Only in Jamaica can growth target be missed consistently and the effort is proclaimed a success.
Over the last seven years, the following countries have grown their GDP an average of over five per cent: Bangladesh, Bolivia, Cambodia, Dominican Republic, Ethiopia, Indonesia, Kenya, Laos, Malaysia, Philippines, Panama, Tanzania, and Turkey. Look at how steady Nicaragua is performing.
What Jamaica needs is a cafeteria approach. Look at what these countries had done to grow their economy and select from the menu those policies that are applicable to Jamaica. We don’t have to reinvent the wheel. The world is our fulcrum and Jamaica has the levers, so they should pull them.
FAR TOO LOW
Jamaica would be a lot closer to the targeted five per cent, or even exceed it, if only EGC had approach the task with an unflinching determination. It would have been nice if there was a greater emphasis on manufacturing, credit and investment, tax collection and productivity.
Expanding the manufacturing base would help immensely. At eight per cent of GDP, this sector is far too low. It should be in the low to mid-teens. Remember the multiplier effect? One dollar invested in manufacturing yields three dollars. Jamaica needs to expand its exports. Exports will go a long way in growing the GDP.
There are not enough investments in the economy, both private and public. In this era of low interest rate, the Government should borrow more to invest in the economy. It should not be constraint by the debt-to-GDP ratio. As long as you are expanding the denominator, which is the GDP, this ratio should not be an impediment. What difference does it makes if it is 75 per cent or 85 per cent?
Credit must be democratised throughout the economy. There are too many worthy businesses that are deprived of the necessary capital they need to grow. The Government must address this.
Productivity is a major drag on the economy. Enhancing productivity could add two per cent to GDP growth. Let’s start with the Government and the banks.
Tax collection is woefully inadequate. The underground economy needs to be tamed. There is too much tax evasion and tax avoidance in Jamaica.
Nowhere is it ordained that the Jamaican economy should consistently underperform. We need an epiphany.