Where can growth come from? Jamaica shouldn’t be surprised to see expected policy outcomes

All one can do as an analyst is to apply your understanding to policies and actions, make your assessments, then see if they’re borne out by later events or data.

I’ve said repeatedly that Jamaica’s government is running a fiscal policy that is not conducive to growth. Now, the pieces are beginning to show that to be the case.

Yesterday, the acting financial secretary in the ministry of finance reported to parliament that growth in the first fiscal quarter was negative: see Gleaner report.

In recent days we also learned that PAYE revenues are down in the first four months of the fiscal year, to July. That should have been no surprise, after relieving people of tax obligations by raising the threshold and making it punitive for those who exceeded the thresholds. So, smart and rational people who look set to earn more wound want remuneration in ways that didn’t put them into higher tax brackets. It’s not complicated. It’ll take some more thinking to understand why this is happening while employment has increased. One obvious answer is that people are getting jobs that pay below the PAYE threshold. That would make sense on several levels, not least the type of jobs supposedly growing.

The other nugget on negative growth was that the primary budget surplus was larger than envisaged under the IMF program.

Personally, I can’t wait to read the next IMF staff report to see how it stitches together this quilt that looks tattered. 🤔

Author: Dennis G Jones (aka 'The Grasshopper')

Retired International Monetary Fund economist. My blog is for organizing my ideas and thoughts about a range of topics. I was born in Jamaica, but spent 30 years being educated, living, and working in the UK. I lived in the USA for two decades, and worked and travelled abroad, extensively, throughout my careers and for pleasure. My views have a wide international perspective. Father of 3 girls. Also, married to an economist. :)

One thought on “Where can growth come from? Jamaica shouldn’t be surprised to see expected policy outcomes”

  1. Again a good piece

    “So, smart and rational people who look set to earn more wound want remuneration in ways that didn’t put them into higher tax brackets ” was called by many who had an inkling of what was what, why get X million and be taxed when I can get Y million be un-taxed and get some awesome benefits

    Liked by 1 person

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