As economic outlook worsens, parties promise to splash cash
ECONOMIST DR Peter-John Gordon has warned of spiralling unemployment in the wake of Jamaica’s central bank’s chilling projection of a seven to 10 per cent contraction in the economy for fiscal year 2020-21.
He believes that the economic crisis is unlikely to improve unless the COVID-19 pandemic eases significantly.
“There are going to be significant job losses, government revenues are going to be done, so the capacity of the Government is going to be curtailed. It is not a pretty picture,” Gordon told The
Gleaner on Wednesday. Speaking at a virtual quarterly press briefing earlier, governor of the Bank of Jamaica, Richard Byles, disclosed that the bleak forecast was a downward revision of the central bank’s projection of four to seven per cent earlier this year.
Byles noted, however, that partial economic recovery is expected to commence in the 2021-22 fiscal year, with anticipated growth of three to six per cent.
“Notwithstanding the expectations for growth, the Jamaican economy is not expected to return to pre-COVID-19 levels before 2022-23,” Byles stated.
Gordon, a lecturer at The University of the West Indies, Mona, said that while there was an impetus “to get the economy moving”, full re-engagement of commercial activity could put health at risk.
“Government can always say they opening this and they opening that, but if people are not comfortable to interact and to go and work, then the output is not going be there,” Gordon said.
The pronouncement came on the eve of the national debate on the economy between Finance Minister Dr Nigel Clarke and his opposition counterpart, Mark Golding.
With both the Jamaica Labour Party and the People’s National Party making big promises in their manifestos, including the construction of between 70,000 and 130,000 houses, respectively, the economist made it clear that the next Government would have to prioritise issues.
The PNP rolled out its wealth plan on Wednesday, promising to dole out $48,000 per year to every household, including subventions of $3,000 for electricity and $1,000 for water.
The PNP did not release details on how it would fund its plan.
“Taxes are a certain fraction of economic activity. So if economic activity grows, then [Government] is going to collect more taxes,” Gordon argued.
“So if the economy contracts, you’re going to lose taxes. And then the ability of the Government to levy additional taxes in this environment is extremely limited.”
At tonight’s debate between Clarke and Golding, Gordon believes that the debaters will have to tell the country how they plan to achieve their plans in light of the fact “that there won’t be a lot of money flowing around”.
“The Government is going to come to power in a very serious recession . ... There is a certain amount of discretionary spending which a Government can make, but as tax revenues fall, that envelope gets smaller,” Gordon asserted.