The economic fallout

THE ECONOMIC impact of the recent terrorist bombings of the US World Trade Centre and the Pentagon have started to hit the local economy. In the international economy, oil prices moved from US$27 a barrel to US$30 a barrel and the rumblings in the financial markets suggest that if we have to return to the overseas market we will face higher interest rates.

In the domestic economy, Air Jamaica has put its losses so far at US$11 million (approx. J$504 million) and tourism interests are busy working out strategies to keep the industry alive and minimise job losses. These are in addition to the losses incurred by exporters, who had made shipments of fresh produce to the US that were delayed at the wharf.

This is hardly good news for the economy that was already grappling with the prospect of reduced tourism earnings after the violence in West Kingston. Of course any reduced earnings from tourism threaten exchange rate stability and could exacerbate government's debt crisis.

These 'old' problems that the authorities face limit the options that they have at their disposal to help stave off some of the negatives caused by the current American crisis. Government has understandably been boasting about the adequacy of the level of its Net International Reserves but the short-term impact of the current crisis ­ that is still unfolding ­ could severely reduce these reserves.

A main positive in all this is that government can push for joint initiatives with the Private Sector such as 'Operation Grow' that involved government and private sector overseas advertising and had already started demonstrating success.

Additionally, Government can use the present crisis as an opportunity to push for consensual agreement on critical economic issues of debt, inflation and growth. Unfortunately, with election in the air, this type of conciliatory politics demands tough, enlightened, visionary leadership that's apparently in short supply.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner.

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