What are the main find­ings of this year’s re­port?

Jamaica Gleaner - - ENTERTAINMENT - Dr An­dre Haughton is a lec­turer in the Depart­ment of Eco­nom­ics on the Mona cam­pus of the Univer­sity of the West Indies. Fol­low him on Twit­ter @DrAn­dreHaughton; or email feed­back to ed­i­to­rial@glean­erjm.com.

As it re­lates to in­no­va­tion and so­phis­ti­ca­tion, Ja­maica is ranked 61 over­all. This is di­vided into ba­sic so­phis­ti­ca­tion where the coun­try is ranked 57th; and in­no­va­tion, where Ja­maica is ranked 70.

The 2016 GCR has high­lighted that mon­e­tary pol­icy has not been enough, and in­suf­fi­cient com­pet­i­tive­ness has been a con­straint to reignit­ing growth world­wide. Fol­low­ing the global fi­nan­cial cri­sis of 2008, many gov­ern­ments have opted to use in­ter­est-rate pol­icy to jump-start growth, but this has been fu­tile in some in­stances due to low or nega­tive real in­ter­est rates. In some cases, bor­row­ing for pro­duc­tive pro­cesses re­mains weak. Some small mid­dle-in­come coun­tries do not have the ca­pac­ity to per­form quan­ti­ta­tive eas­ing.

In this fourth in­dus­trial revo­lu­tion­ary era, tech­no­log­i­cal ad­vance­ment and in­no­va­tion con­tinue to be the main driv­ers to in­crease de­vel­op­ment. The re­port also out­lined that a de­cline in the open­ness of some coun­tries is fur­ther hav­ing a nega­tive im­pact on growth. It high­lights that a more open econ­omy that is par­tic­i­pat­ing in in­ter­na­tional trade cre­ates av­enues to bet­ter ab­sorb tech­nol­ogy nec­es­sary to in­no­vate be­cause firms are ex­posed to com­pe­ti­tion and new ideas and ben­e­fits from tech­no­log­i­cal trans­fer. Sim­i­larly, firms can ben­e­fit from larger for­eign mar­kets. The World Eco­nomic Fo­rum be­lieves that non-tar­iff bar­ri­ers to trade are in­creas­ing in re­cent times, which may limit the re­cip­ro­cal ben­e­fits as­so­ci­ated with in­crease free trade. Ac­cord­ing to the re­port, economies in all in­come groups have be­come less open since 2007. the Latin Amer­ica and the Caribbean re­gion have fallen, and some coun­tries’ economies may en­counter re­ces­sions. The ma­jor com­mod­ity ex­port­ing coun­tries, in­clud­ing Brazil, Venezuela, Colom­bia, Ecuador, and Ar­gentina are wit­ness­ing a fall in the value of their ex­ports due to the end of the com­mod­ity su­per-cy­cle. Ac­cord­ing to the World Eco­nomic Fo­rum, the sub­se­quent fall in global trade has also hit de­mand for man­u­fac­tur­ing ex­ports, fur­ther re­duc­ing the value of ex­ports across most of the re­gion. The re­sult of these nega­tive terms of trade shock has been a large trade deficit, pro­duc­ing cur­rent ac­count deficits and gov­ern­ment bud­get deficits. De­spite the rel­a­tive de­pre­ci­a­tion of the re­gion’s float­ing cur­ren­cies against the US dol­lar, ex­ports have not re­cov­ered. This makes ev­i­dent the mag­ni­tude of the com­pet­i­tive­ness chal­lenges in the re­gion, where pro­duc­tiv­ity has been fall­ing, on av­er­age, dur­ing the last 20 years.

Ac­cord­ing to the re­port, the top per­form­ing coun­try in the re­gion re­mains Chile (33rd), in­creas­ing two places in the rank­ings, fol­lowed by Panama (42nd), with an im­prove­ment of eight po­si­tions. Costa Rica falls slightly to 54th rank, and Mex­ico (51st) im­proves by six po­si­tions. The over­all range of scores in Latin Amer­ica and the Caribbean re­mains large, with the worst-ranked in 130th place and the best-ranked in 33rd place. Within pil­lars, the largest re­gional gaps re­main in the macroe­co­nomic en­vi­ron­ment, re­flect­ing the mag­ni­tude of the com­mod­ity and in­vest­ment shock on com­mod­ity-ex­port­ing coun­tries, and size of do­mes­tic mar­kets. We also ob­serve an in­creased dis­per­sion within the in­sti­tu­tions pil­lar, driven by the ethics and cor­rup­tion sub-pil­lars and re­cent scan­dals in the re­gion.

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