CEDRIC WILSON, Guest ColumnistSir Alexander Bustamante, in his day, was outrageously witty and had an amazing sense of humour. While he served as Prime Minister, the story is told, he came up with a strategy for Jamaica's economic growth which he unveiled before his Cabinet. Bustamante postulated that if Jamaica invaded America then our powerful neighbours to the north would take over the country and rapid economic growth would be a matter of course. To support his argument, Bustamante cited Japan's unprovoked aggression towards the U.S. in the Second World War and the consequent phenomenal development they were experiencing at the time. The Cabinet was then asked for its views on the strategy. The room was silent for a long time then finally, a lone minister raised his hand. "What is the problem?" Bustamante asked. "Chief," he said "then suppose we win?"
potential force of
the Jamaican spirit
It is clear that Bustamante wanted to stimulate and entertain his Cabinet colleagues. However, his contemplative minister who seems to have been a disciple of Doubting Thomas, if not the reincarnation of Thomas himself, changed the entire thrust of the idea. In the end, the issue was not the dilemma of the Jamaican economy but the potential force of the Jamaican spirit. Implicit in the minister's question was the suggestion that Jamaica might very well succeed in doing what Japan failed to do.
Looking back at 2005, it is reasonable to expect the economy to grow in the region of 1.2 to 1.5 per cent this year. Mother Nature was less than kind the economy still recovering from the effects of Hurricane Ivan suffered droughts and bush fires in the early months, and hurricane and flooding in middle and latter months of the year. For the first nine months of the year, the agricultural sector which bore the brunt of nature's fury, was down 15.3 per cent. The tourism sector also showed signs of decline in the middle of the year owing to the hurricanes but rallied in the latter months and should reflect marginal growth for 2005.
The construction sector, which traditionally has benefited from remittance inflows, was vibrant after an unprecedented succession of hurricanes in the region. In addition, a number of major investments in tourism and other infrastructural projects added to the boom in the sector.
Growth for the sector over the first nine months, relative to the same period last year, was 9.1 per cent. Indeed, the bauxite-alumina sector also performed well, registering growth in export earnings of 15.4 per cent over the period January to September.
The economy, which meets virtually all its energy needs with imported fuel, had to grapple with steep increases in oil prices. In January, the price of oil was roughly US$47 per barrel. However, it showed an upward trend for the first half of the year and attained a record high level of US$70 per barrel in August after Hurricane Katrina traversed the Gulf Coast. Yet, the economy demonstrated a fair degree of stability with the Jamaican dollar depreciating by five per cent relative to the U.S. dollar and the inflation rate should be slightly lower than the 13.7 per cent registered in the previous year. Nevertheless, business confidence, which the stock market generally captures, was down at the end of 2005.
What then can we expect in 2006? The agricultural sector should continue the recovery which started in the third quarter of 2005. Indications are that the construction sector should remain vibrant and given the level growth being experienced in the global economy, the prospects are encouraging for the bauxite-alumina sector. Tourism remains a sector with tremendous potential; the greatest threat to the industry is complacency.
The assessment of the three primary threats to growth offered by the IMF Assistant Director of the Western Hemisphere Department, Ms. Ratna Sahay, for the Latin America and the Caribbean last December, is relevant: First, the vulnerability of the region to hurricanes and other natural disasters; second, the weakening of the terms of trade though the erosion of preferential trade agreements and the possibility of rising oil prices; and third, the disruptive effect of political campaigns.
economy showing
signs of robustness
The hurricane season that the country endured and the oil prices inflicted on the economy during 2005 could have reversed the sluggish growth exhibited over the last couple of years. But it did not. It is important that we grasp that the economy is finally showing signs of robustness. Putting these threats identified aside, there is no reason why the economy cannot grow by at least three per cent in 2006.
Nevertheless, the economic dilemma that the country faces of high levels of public debt and low income levels requires sustained growth of levels in excess of three per cent annually. This kind of growth level cannot be generated by the Government, not even if they recaptured the imagination of Bustamante and attempt what he playfully postulated. While there are still a couple of variables that need to be tamed, the structure of the economy is such that the private sector ought to be the engine of growth. And indeed, they have the resources and are capable of doing it. But like Bustamante's contemplative minister, the focus requires a subtle change. It must be shifted from the paralysis of a dilemma to the potential and power of the Jamaican spirit. That is the only sure path to high sustained levels of growth.
Cedric Wilson is an economics consultant who specialises in market regulations. He may be contacted at conoswil@hotmail.com.
