ON THE face of it the economy is starting the new year with a number of clear positives. These are all the more significant given the deleterious effects of the events of September 11 on the international and local economy.
These positives relate mainly to the relatively stable macro-economic environment. First, there is the record US 1.8 billion Net International Reserves that recently occasioned a 1.1 per cent point and a 1 per cent point reduction in the 270-day and 365-day repo rate, respectively. Secondly, inflation though slightly higher for the past calendar year, is set to come out at the single digit level set for the fiscal year.
Third, is the promised displacement of the bauxite levy that should impact positively on the sector. Then, there is also the near total rehabilitation of the financial sector. Finally, there is the expansion of the telecommunications sector that is becoming increasingly liberalised.
But these positives are countered by the many uncertainties that plague the economy. For one thing there is the unfolding impact of September 11 that is expected to lead to a 12 per cent or US$144m loss in tourism earnings this fiscal year. Additionally there is the still burgeoning domestic debt. Finance Minister Davies recently disclosed that the $120 billion FINSAC debt will add $20 billion worth of debt-servicing on this year's budget.
In a local context the major imponderable is the impending national elections. This could cause investors to adopt a 'wait and see' attitude that could hurt investment flows. Then, there is the failure to come to grips with the ongoing crime problem which impacts negatively on investment flows. Lastly, is the latest NetServ controversy affecting the IT sector that was supposed to drastically alter the unemployment situation.
The irony in all this is that some of these problems can be anticipated by a proactive government with the requisite managerial skills to design strategies to minimise any expected negative fall-out. We believe that transparent policies, effective communication, extended Public/Private sector partnership are some of the options available. Were these policies to be pursued, instead of politically expedient ones, 2002 could be a watershed year for the economy and its recovery.
The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner.
