'We have to produce more to grow'
What are the GDP growth projections for 2016?
Given the expected upsurge in economic activity in Jamaica for 2016, economic growth of 1.3 per cent projected for the island in 2015 is expected to increase to 2.1 per cent in 2016. Although the projections are estimated, to be less than the global average of 3.4 per cent, it is greater than the projected average of 0.1 per cent growth for the entire Caribbean and Latin American region.
What role does the exchange rate play?
The Jamaican dollar exchange rate is now at a record high $122 to US$1. The currency depreciated by 4.26 per cent throughout last year to close 2015 at $120.24. Many believe that a stable currency can help to facilitate more growth in the nation's economy. On the flip side, the currency cannot become stable unless Jamaica increases the amount of good and services it produces and sells to the rest of the world.
The price of oil has been meandering around $40 per barrel and the country's current account deficit has been narrowing. A national cry for everyone to buy Jamaican, but sometimes it is difficult since we do not produce most of what we demand. The truth is, if we produced a lot of what foreigners demand, then we could use the money earned to buy what we want from foreigners, or we could just focus on producing what we demand for ourselves (increase self-sufficiency).
How can Jamaica
increase the amount it produces per year?
The processes through which a country engineers the correct strategy to increase economic growth or economic development must be achieved taking its specific advantages and constraints into consideration. Fundamentally, small-island developing states that are under-industrialised and have predominantly focused on low-value primary products and/or low-value services must re-engineer its strategies to achieve it growth and developmental goals concurrently.
Economic policy should support linkages from primary to secondary and tertiary production processes. Incentives should be provided for companies to increase the volume of domestic inputs used in their production process. In recent times, larger companies, for example, Red Stripe and GraceKennedy, have been making efforts to increase the share of local inputs in their production processes, others should catch on swiftly. Policies should also support production oriented/related poverty alleviation techniques instead of the usual non-productive transfer payments.
How to fuel
The data have shown that since 1990, there has been a gradual increase in the amount of consumer loans and a corresponding decline in loans offered to the productive sector, especially to nano, small and medium-sized enterprises. Jamaica should seek to empower these types enterprises by creating a National Development Trust (NDT), similar to the Grameen Bank established in Bangladesh.
This NDT will inspire borrowers to become savers so that their money can be used to generate new capital to further increase economic activity. Similar to Grameen borrowers who are forced to become more socially responsible and adopt positive social habits, Jamaican borrowers will have to do the same to try to foster honesty and integrity in the pursuit of individual and national objectives. All children of Grameen Borrows must be enrolled in school, which helps to foster social change and a next generation who are better thinkers. Each borrower must be a member of a group consisting of five persons, but is responsible to repay their own portion of the loan. The banks cease lending to all members of a group if any of them defaults.
How successful has the Grameen system been?
Thus far, more than 50 per cent of Grameen borrowers have elevated from absolute and relative poverty. More than 50 million people have elevated from poverty from exploitation of the Grameen banking system in since the early '80s. Jamaica's poor population is less than one million. It should not be difficult to employ the Grameen strategy to achieve growth and poverty alleviation objectives at the same time. The Grameen Bank is rooted on solidarity lending and the method has been successful in more than 43 countries around the world.
Management has to be at the heart of everything. Research has indicated that good management and supporting structures are important for the success of the initiative. Evidence suggests that initiatives to improve welfare sectors in some Asian countries through production oriented poverty alleviation strategies in lieu of the traditional consumption-oriented transfers was constrained by management deficiencies and failure to provide key support for production related activities.
- Dr Andre Haughton is a lecturer in the Department of Economics on the Mona campus of the University of the West Indies. Follow him on Twitter @DrAndreHaughton; or email feedback to firstname.lastname@example.org.