By Dennise Williams, Staff ReporterTHE Bank of Nova Scotia (BNS) is bullish on Jamaica. The bank believes that the long-term prospects for the country is good.
Although the major world economies are out-pacing Jamaica hands down in terms of economic growth, the president of the Canadian parent company of BNS, Richard Waugh, gave Jamaica overall good marks in his presentation to the bank's shareholders at the recent Annual General Meeting (AGM) held at the Pegasus Hotel on February 20.
Mr. Waugh did speak to the many challenges that the country faces but reiterated the bank's commitment to be a part of the expected economic recovery. In terms of growth prospects, Mr. Waugh states, "The country's growth prospects are gradually improving, driven by the substantial 18 per cent-plus increase in tourist arrivals over the past year. Overall, mining output rose by over eight per cent, driven by increases in bauxite and alumina."
But as we all know, Jamaica has many challenges. Mr. Waugh outlined a few.
In public finances, the country's debt to Gross Domestic Product (GDP) ratio and the cost of servicing the public sector domestic debt are important issues.
While the central bank has recently lowered interest rates, they remain much higher than in 2002.
The recent sugar crop yielded the lowest output level in the past 60 years.
OPTIMISTIC ABOUT LONG-TERM PROSPECTS
But despite this, Mr. Waugh states that, "In spite of the challenges facing the country, I am optimistic about Jamaica's long-term prospects. As a sign of the confidence we have, Scotiabank recently agreed to provide the Government with a US$100 million loan, to help reduce dependence on domestic capital and thus help lower interest rates and bolster reserve levels. We recognise Jamaica as a key market for Scotiabank, and we continue to have great expectations for the years ahead."
For the year ended October 31, 2003, Scotiabank Jamaica earned net profits of J$5.5 billion.
BNS also operates in over 50 countries spanning Asia Pacific, Latin America and the Caribbean.
As such, the bank is in a unique position to give commentary on the worldwide economy. Mr. Waugh presented highlights about each major economy. "A synchronised recovery among major industrialised nations is currently taking place led by the United States." Overall, the global economy is on the upswing led by the following factors:
Low interest rates
Well-controlled inflation
Solid GDP growth
There are some areas of concern. States, Mr. Waugh, "Trade and investment flows between nations have been and will continue to be affected by disruptive volatility in global foreign exchange markets especially the disorderly depreciation of the U.S. dollar and by trade liberalisation initiatives. And producers around the world are beginning to experience intense competition from nations with very low cost structures in particular China." Other areas of concern to the world economy that were noted by Mr. Waugh were:
Securities markets remain somewhat jittery.
Global investors become increasingly nervous about the financing needs of enormous U.S. trade and fiscal deficits and the disruptive effect of a weakening U.S. dollar.
The U.S.-led military intervention in Iraq as well as the unrest related to the Israel-Palestine conflict has helped increase the cost of energy resources. Future price fluctuations will obviously be highly dependent on events in these two areas. Mr. Waugh then gave a synopsis of what is happening in each region that BNS operates in.
ASIA PACIFIC
Asia Pacific is a mixed bag with China steamrolling ahead and Japan is taking baby steps to recovery. Explains Mr. Waugh, "China continues to steam ahead in GDP growth, leading the region. Its expansion, about eight per cent per year through 2005, is broadly based, led by exports and almost 20 per cent yearly gain in industrial production. Japan's economy is slowly recovering, with exports to China supporting modest growth. At the same time, Japan is informally exercising a stabilising role of regional lender of last resort on the back of a robust international reserves position. In India, low interest rates and the country's low cost structure are fuelling six per cent plus growth through 2005. Consumer spending is recovering in South Korea, prompting more business investment and export growth, despite the risks linked to the North Korean conflict, which remain latent.
EUROPE
Europe is experiencing growth, but this could be hampered by the strength of the euro versus the U.S. dollar. However, England who is not a part of the euro currency also is expected to experience growth. "Europe recent economic growth is accelerating, inspiring business confidence and improving labour markets. Consumer spending is expected to pick up over the next two years, prompting further growth, as its core countries gradually implement structural tax and labour reforms. The United Kingdom, outside the euro currency zone, will continue to be affected by currency fluctuations. The economy is expected to grow by nearly 2.5 per cent in 2004."
NORTH AMERICA
The three large economies of North America, the United States, Mexico and Canada, are experiencing strong growth lead by the U.S. However, Mexico's political struggle for reform and the rising value of the Canadian currency are concerns. Explains Mr. Waugh, "the U.S., Canada and Mexico continue to grow. The U.S. economy will lead the way, with GDP growth of almost five per cent in 2004. Exports will benefit from the depreciation of the U.S. dollar and the resurgence of global demand. The U.S. economic momentum is beginning to have a positive effect on the Mexican economy, which is expected to grow by over three per cent in 2004 and almost 4.5 per cent in 2005. Our economists at Scotiabank project that Canada's GDP will grow by around three per cent per year over the next two years, driven largely by consumer spending. The Canadian dollar is expected to continue to climb versus the U.S. dollar, as concerns about the stability of the U.S. fiscal and external imbalances persist. Overall, the large North American economies are in good shape."
