Can we make 2.3% growth target?
THE FIRST-QUARTER Jan-Mar 2017 growth figure was quite disappointing, coming in at estimated 0.6%, well below expectations. Yet Jamaica’s Economic Growth Council (EGC), buoyed by an effervescent Chairman Michael Lee-Chin, is projecting a 2.3% growth rate for 2017. In its quarterly ‘Report to the Nation’ recently, the EGC exuded confidence that all sectors would grow, with the exception of producers of government service.
The 2.3% forecast would be welcome news if it came to pass. It would be an important step in the council’s articulated formula of 5-in-4, which means that in four years, Jamaica’s growth rate will be at least 5%.
Robust growth would strengthen Government’s hand in improving the country’s infrastructure and allocating more resources to social programmes.
Adding credibility to the EGC’s bullishness is the recently released survey by the Ministry of Labour and Social Welfare that reported that more than 80% of 660 firms that participated in the survey revealed that they were planning to grow or expand their business within three years to five years. The survey was noteworthy because the prevailing sentiment was expressed by small, medium and large firms.
Similar reinforcement for the EGC’s fairly rosy forecast for this year came in the announcement of the tourism numbers, which showed the industry raking in a record US$1 billion over the past four months, January to April. Of note was the fact that this represented a 13.6% increase in both cruise shipping and stopover earnings over the corresponding period last year.
Besides the hotel and restaurants sector, the EGC expects that significant contributors to growth this year will come from agriculture, forestry and fishing; and electricity and water supply.
While we entertain thoughts of an elevated expansion of the economy, our optimism must be tempered by realities on the ground. First-quarter figures for the agriculture sector were lower than expected because of drought conditions. So far, second-quarter production has been affected by torrential rains and flash floods.
The beet army worm outbreak, which has had a devastating effect on scallion, has also affected onion, tomato, cucumber and watermelon. Sugar, which employs so many, remains dire and unresolved. Cane has been left rotting in the fields and our major factories are undecided in the midst of losing large sums of money.
While the country has experienced eight consecutive quarters of growth, there has been no clear uptrend leading to higher growth targets. For example, in 2016, first-quarter growth was 0.9%, followed by 1.4%. Then there was an impressive 2.0% surge in the third quarter. Pundits, excited by the upward trajectory, were forecasting fourth quarter posting well above 2%. Unfortunately, fourth-quarter figures dipped to 1.1%, leading to 2016 fullyear growth of 1.4%, below the heightened expectations of government ministers, officials, and the EGC.
For the economy to grow 2.3% for the year, the mining and quarrying sector has to take off. Commodity prices worldwide must continue the previous year’s uptick and our decline in bauxite alumina production last year must be reversed sharply this year.
The likelihood of a major turnaround in production is not assured, since our largest refinery, formerly Alpart, now JISCo, will not really get up to speed until late in the second half of this year.
NOTHING MAJOR TO BOOST GROWTH
Moreover, there is nothing major in the offing this year to boost growth significantly over the previous year in the following key industries: manufacturing; construction; finance and insurance services; and transport, storage and communication.
Remember, what we are asking for 2017 is not only to replicate the 2016 performance of 1.4%, but for the economy to grow by an additional 0.9%. This at a time when Government, in continuing its emphasis on entitlements and redistribution, as well as its obligation to make substantial debt repayments, has not devoted sufficient resources to the capital side of the Budget.
This at time when crime and social dysfunction seem impossible to rein in.
The benchmark target for the public sector wage bill, which from as far back as 2010 was supposed to be 9% of national output, but has been constantly deferred, is now incorporated in the new arrangement with the IMF.
As we contemplate growth rates of 2.3% for this year and 5% for 2020, the question we must ask is what significantly has changed in our economy to assure us of such success?
It is a bit of good news that more spillover is taking place in the tourism sector with higher levels of investment being undertaken to build and upgrade attractions. There are, as well, increasing linkages with agriculture and culture. The pace has to be accelerated, however, to bolster low-level per-capita tourism expenditure on local shopping when compared to other vacation destinations. Many destinations are earning three times Jamaica’s intake, which we have to correct.
In the interim, with any luck from lower oil prices in 2017, strong performance from the real estate, renting and business activities sector, together with an ongoing robust performance from the hotel and restaurants sector, we could achieve 1.3% growth this year, a tad below last year’s 1.4%.