JAMAICA will have the seventh slowest growth rate in the world up to 2015, according to a new International Monetary Fund (IMF) report analysed by the Business Observer, indicating missed opportunities for the debt-ridden country.
No cranes dot the capital city’s business centre, its roads are filled with holes similar to the tattered clothes of beggars at the stoplights, and oftentimes youth recite an expression that reflects a lack of opportunity — nothin’ nah gwan’. Jamaica, however, can expect more of the same as it is projected to trail some 143 nations in the world in growth statistics, which is a barometer of prosperity. With projections of about 1.3 per cent annually over the next five years, the island will grow three times slower than the world economy, according to charts within the World Economic Outlook (WEO) published this month by the IMF. Unfortunately, the country’s output or gross domestic product (GDP) could dip even further due to Tropical Storm Nicole which killed about 13 persons and destroyed infrastructure last month.
“The rains will affect GDP performance because it resulted in loss of productive time. Further, it will widen the fiscal deficit, which has the potential to derail other economic variables and can result in serious problems for the macro-economy, if not managed properly,”said Densil Williams, a Mona School of Business lecturer, in response to Business Observer queries.
The only territories — amongst 150 — projected to grow at a slower pace on average than Jamaica over five years are St Kitts & Nevis at 0.3 per cent, oil-rich Venezuela at 0.33 per cent, Brunei Darussalam at 1.03 per cent, Croatia at 1.03 per cent, Antigua at 1.13 per cent and Equatorial Guinea at 1.23 per cent. Interestingly, three of the six territories trailing Jamaica are in the Latin America and Caribbean region. However, generally, the region is projected to outperform the world economy at 4.5 per cent on average over the period, due to stellar performances expected from Brazil, Argentina, the Dominican Republic, Peru, Chile and Colombia.
Jamaica’s future reflects its past, having attained only one per cent annual growth over 30 years whilst neighbours have grown at five per cent.
“The IMF is saying that they don’t foresee Jamaica changing its growth patterns in the near future,” stated Charles Ross, financial analyst and principal of Sterling Asset Management, a non-aligned investment and securities outfit.
The problem is that Jamaica has cultivated a society that embraces poverty and distrusts wealth, reasoned Ross about the country’s generation of austerity. Comparatively, Haiti the poorest country in the Americas, will grow twice as fast as Jamaica over the period under review whilst the Dominican Republic, often compared to Jamaica for its historically similar income levels has galloped past Jamaica with growth rates consistently in the high single digits from the ’90s trending into 2015.
“If people don’t believe in the benefits of economic growth it has lifted the Chinese out of poverty into prosperity. Thirty years ago most Chinese nationals were barefoot peasants living on a bowl of rice and today they live in modern cities with wealth and have the second-largest economy in the world,” Ross said adding that countries in Latin America are replicating the Chinese model.
Jamaica’s debt-to-GDP, currently some 130 per cent, is seen as a primary reason for suffocating its growth prospects as Government hasn’t the money to pump into spending on construction and infrastructure.
“We have borrowed and borrowed and now the debt has itself become an obstacle for growth because you have to put so much of government resources into servicing the debt that very little is left for public investment in infrastructure that would facilitate growth,” stated Ross, who added that Jamaica’s US$1.3-billion stand-by agreement with the IMF signed in February should have included growth objectives. “I don’t understand why the IMF programme did not address growth. It should have addressed growth.”
Jamaica, in order to improve its growth prospects will have to maintain a sustained period of macro-stability in the economic, social and regulatory arena, argued Williams. Further, he said the private sector will have to design strategies to enhance its international competitiveness and worker productivity. “The aim is to generate higher levels of productivity which will translate into higher growth,” he concluded.
Jamaica’s ability to attract foreign direct investment (FDI) has trailed the region, growing four times slower than the Caribbean between 2001 and 2008, according to the Annual Statistical Yearbook by the Economic Commission for Latin America and the Caribbean (ECLAC) published in June. ECLAC, which is one of five regional commissions of the United Nations Economic and Social Council, added that Jamaica’s external debt grew twice as fast as the Caribbean on a whole and 16 times faster than Latin America over the same period. At the same time, Jamaica’s trade deficit worsened three times faster than the Caribbean region but slightly worse than Latin America.
Jamaica’s economic decline mirrors its decline in the UN Human Development Index (HDI) at 100 in 2009 from 92 in 2006. The Doing Business 2010 report, a joint publication of the World Bank, International Finance Corporation and PricewaterhouseCoopers, ranked Jamaica one of the 10 most difficult countries in the world to pay taxes — 174 out of 183 countries.
The IMF intimated that Jamaica was not alone in terms of operating a fragile economy affected by the global downturn.
“The global recovery remains fragile, because strong policies to foster internal rebalancing of demand from public to private sources and external rebalancing from deficit to surplus economies are not yet in place. Global activity is forecast to expand by 4.8 per cent in 2010 and 4.2 per cent in 2011, broadly in line with earlier expectations, and downside risks continue to predominate. WEO projections are that output of emerging and developing economies will expand at rates of 7.1 and 6.4 per cent, respectively, in 2010 and 2011,” the IMF stated about the WEO report.