Jamaica
News - Real Estate - Economy (June 30, 2004)
Economy looking up
Both Prime Minister P J Patterson and
the Minister of Finance and Planning Omar Davies have pointed to the positive
signals coming from the local economy and the prospects of stronger growth
performance this year. The signals are from a broad range of indicators,
including the balance of payments, inflation, and the fiscal accounts in the
first two months of the financial year. Our financial markets are also showing
greater stability after the shocks of 2003, and though activity on the local
stock market has calmed down, there is still an underlying improvement in
confidence levels that is encouraging.
Having regard to the huge public debt
and the burden that it imposes on the government's budget, it is important that
the greatest care be exercised in ensuring that the fiscal deficit target is
achieved. As has already been demonstrated, the achievement of this target will
assist the process of reducing interest rates, such that the debt burden becomes
easier and subsequent targets will be even easier to achieve. In other words, we
now have the opportunity of entering a virtuous circle of greater stability,
lower interest rates, a falling debt burden, and faster economic growth. The
possibility of a rise in US interest rates makes it even more urgent for Jamaica
to put its fiscal house in order.
For the time being, expenditure controls must
therefore remain tight - though this will involve some sacrifice, including in
areas of great social need. Equally, there must be aggressive revenue
collection, which can be bolstered by the passing of legislation that have
revenue implications.
These are not matters that will be popular,
but it is hardly likely that the positive outcomes that we desire with respect
to interest rates, the public debt, and economic growth, can be realised without
this necessary fiscal adjustment. The fact that the IMF regards our fiscal
programme as achievable should carry some weight in the risk assessment of our
creditors.
The performance of the local economy in the real
sectors is even more encouraging, and key indicators suggest that the growth
rate is now exceeding 3 per cent on an annualised basis. Not only is there
robust output growth in the vital foreign exchange earning sectors of bauxite
and tourism, but activity in construction and the key service sectors is
accelerating. If one uses domestic cement sales as an indicator of construction
activity, then output in that sector is well above the official figures, and
this should not be surprising, given the major infrastructural projects under
way at the port of Kingston, Sangster International Airport, Norman Manley
International Airport, Highway 2000, Northcoast Highway, and the increasing
number of housing projects across the island.
As the year proceeds, we are likely to see an
even greater level of activity in the construction sector, as at least two major
hotel projects will get under way on the north coast. By early next year,
several other projects will begin, and investment activity in the bauxite
industry should be gathering pace. What is good about all of these projects is
that substantial foreign investment flows will be generated in the construction
phase that should help to ease the pressure on our balance of payments. Of
course, the bauxite and tourism projects will also generate sharply higher gross
foreign exchange earnings, once they are in the operational phase.
Whether this growth momentum will, at last, lift
the tide for the manufacturing sector, will depend greatly on the effectiveness
of the coordination between the public and private sectors to ensure that
domestic producers are able to tap the opportunities that will be created. There
can no longer be any doubt about the close linkages between the agricultural,
manufacturing and transport sectors and tourism. However, local producers must
establish organic links with the investors in the tourism sector and organise
themselves to produce more efficiently and competitively.
JAMPRO, as the government's investment
promotion agency and the entity that has played a critical role in securing
several of the new tourism investments, is well positioned to bring the parties
together, but time is of the essence.
|
