Ja facing ‘lost decade’ without robust recovery
Jamaica is facing a lost decade of economic growth, unless its recovery surpasses three per cent expansion annually, Professor Densil Williams has warned. The pro-vice-chancellor of the University of the West Indies, Mona, says the Jamaican...
Jamaica is facing a lost decade of economic growth, unless its recovery surpasses three per cent expansion annually, Professor Densil Williams has warned.
The pro-vice-chancellor of the University of the West Indies, Mona, says the Jamaican Government needs to find more ways to increase capital spending to engender higher levels of growth and reduce joblessness.
The COVID-19 pandemic has led to historic economic contraction for Jamaica, especially in the June 2020 quarter when the economy lost 18.4 per cent of real value. Economic contraction for the full fiscal year is projected to be 10 per cent or higher. The economy also shed tens of thousands of jobs, mostly in the tourism sector, pushing the unemployment rate to 10.7 per cent.
“If we grow at 3 per cent, then we will see a recovery by roughly 2025,” Williams said, at a post-budget forum organised by Victoria Mutual Wealth Management Limited and held online on Wednesday.
“If we do not grow at about 3 per cent or more, then the recovery process will take at least a decade. So, if we stick to the traditional growth path at 0.7 per cent, then we will not recover to 2019 levels until 2030-31,” he said.
Williams, however, expects Jamaica to grow above the three per cent level, saying the economy will likely expand by four per cent annually over the medium term, rather than the 0.7 per cent rate of the past. But he also indicated that he would prefer to see growth within the region of five to seven per cent, which would lead to recovery by 2023-24.
The Planning Institute of Jamaica is estimating that growth could fall within a range of 4 per cent to 8 per cent in fiscal 2021-22, depending on the speed of COVID-19 vaccine roll-outs in Jamaica and countries around the world, and the pace of recovery of the travel and tourist markets.
“The policies that we implement over the next fiscal year must be robust enough to generate the types of economic growth that we will be needing for recovery, and to get the 135,000 persons back in employment,” he said.
The tourism sector would have the steepest hill to climb towards recovery, the PIOJ having estimated that it would have contracted by 70 per cent by the close of this fiscal year, on March 31, which coincides with a full year of the pandemic in Jamaica.
This year’s national budget aims for a fiscal surplus of $5.4 billion, which equates to 0.3 per cent of gross domestic product, or GDP, and a primary surplus – that is, revenue minus expenditure before debt obligations – of $131 billion, or 6 per cent of GDP.
Williams suggests that the primary surplus be reduced to four per cent of GDP, to free up resources that could be put towards the country’s growth programme.
The Jamaican Government plans to stimulate the economy, in part, through a $60-billion SERVE Jamaica plan that focuses on COVID-19 vaccinations, road build-out, and small business support. Williams wants that extended to $82 billion under a plan called BERI, focusing on the banking sector, economic recovery and investment.
The BERI plan would be implemented over more than one fiscal year and lead initially to increased debt, but the academic argued that more than half of the funding for it could come from reducing the primary surplus target from 6.2 per cent to 4 per cent.
“We are saying, do not rush for a fiscal surplus in the first year of recovery, but look at how we can actually use what’s there now and run a small deficit and build the economy in the shortest possible time,” he said.
Unemployment is currently at 10.7 per cent, after losses of 135,000 formal jobs; the economy is expected to contract by 10.5 per cent to 12.5 per cent in this fiscal period ending March 2021; and Government revenue is down 11 per cent.
The VM Wealth forum, held within that context, looked at the challenges and opportunities for Jamaica and the extent to which this year’s national budget, on which debate kicked off in Parliament with the opening presentation by Minister of Finance Dr Nigel Clarke on Tuesday, will address the concerns. Other presenters included Dwight Jackson of VM Wealth; Jamaica Chamber of Commerce president Lloyd Distant; Glen Lawrence of Couples Resorts; UWI lecturer Dr Deborah Hickling-Gordon; and medical officer and national epidemiologist Dr Karen Webster Kerr.