Stark correlation seen between J’can agriculture and GDP growth
AS AGRICULTURE continues to contribute the lion’s share to the expansion of the Jamaican economy, the resident representative of the International Monetary Fund (IMF) is pointing to the need to beef up rural infrastructure and accelerate land titling for farmers.
Dr Constant Lonkeng Ngouana pointed to data that show that in Jamaica “when agriculture is up, growth is up. When agriculture is down, growth is down, so the correlation is very sharp.”
“And I don’t want that point to be taken lightly,” he said, noting that Jamaica depends heavily on agriculture and that it does have an impact on aggregate output.
Illustrating using a chart of output in agriculture plot against rainfall, the IMF resident representative said that as it rains, there is more output, but noted that it becomes an issue above a certain threshold.
“In Jamaica, when it rains too much, it’s an issue for agriculture,” he said, underscoring the importance of the sector to the Jamaican economy also because of the size of the labour force involved in such activities.
“The correlation between GDP growth and output in agriculture is stark,” he adding, while noting that even in periods of contraction, it was usually driven by the downward movement in agriculture and that hence it speaks to the need to strengthen resilience in the sector.
Issues faced by farmers, Lonkeng said as he addressed the Private Sector Organisation of Jamaica President’s Forum on Tuesday, include rural infrastructure such as roads, which means farmers are sometimes not able to transport their produce from production points to markets without damage.
“So rural infrastructure has to be one key area of focus,” he emphasised.
Lonkeng also referred to access to finance, pointing out that one of the reasons farmers are not able to obtain financial services such as credit is the lack of collateral.
“Accelerating land titling can go a long way in securing access to finance for farmers,” he said. “I understand the problem is even more acute for women farmers, who do not necessarily have ownership in the land” on which they grow crops or raise livestock.
He also noted that farmers sometimes have excess supply of produce but do not have storage capacity.
As to the broader economy, the IMF rep pointed to indicators that have assisted Jamaica’s macroeconomic stability, including debt reduction from about 150 per cent of GDP in 2013 to now less than 110 per cent and projected to be at 60 per cent by 2025-26, as well as unprecedented adjustment of the current account from double digit in 2012 to now two to three per cent of GDP.
“Fiscal policy in Jamaica is anchored around a clearly articulated fiscal rule, and President Mitchell mentioned a while ago about the plan for crime, “he said, referring to PSOJ President Howard Mitchell. “I think one of the ingredients has to be a clearly defined anchor which can be measured, and we need a rule that can navigate through the political cycle,” Lonkeng added.
He used those macroeconomic indicators to indicate that “Jamaica’s story of fiscal discipline since 2013 has been bought by international investors. It seems that international investors have bought into the Jamaican story more than Jamaicans themselves”, suggesting that maybe it’s the legacy of the past.
The IMF resident representative said that although growth is low, Jamaica is not an economy that goes up and down as used to be the case because of a generally more predictable economy.
However, he said that although there is robust job creation, for example, it is not reflected in the economic growth numbers and “that adds to the puzzle”.
He also noted that the economy is still vulnerable to weather shocks, requiring Jamaica to strengthen its resilience to deal with those events.