I’ve not read any Budget documents through this year, but know that the spending estimates are about J$855 billion +4.7%, versus projected inflation of 5%, for the fiscal year, so a fall projected decline in real terms). At some stage, I’ll take a butchers and see where that wonga is going. But, from what I’ve heard and seen so far regarding the debate, Dr. Nigel Clarke is looking to correct some of what I said before were mistakes. I’ve not been reluctant to point to what I thought was clear incoherence in the government’s policy: talking about wanting faster GDP growth but having in place fiscal policies that were clearly growth negative, especially hiking indirect taxes having relieved some of direct taxes. Try as it might, the Bank of Jamaica and monetary policy was never going to do much to get things going faster. (I could get into some #Econ101 babble about monetary transmission and its flaws, but will resist the temptation.)
The string of anemic growth data (despite a string of consecutive quarters of growth) is I think vindication of my assessment. I was also not at all impressed by the ‘5 in 4’ mantra and had to suppress a laugh when the PM said it was “aspirational“; note, Webster’s writes ‘suggestive of a high level of success and social status and therefore appealing to people‘ (my stress)–suggestive of, not actually. Dr. Clarke’s and the rest of the government trumpeting of the 20 consecutive quarters of GDP growth is another piece of ‘never mind the quality, feel the width’, in my humble…
So, the new ‘1.5’ roll-back in GCT, from 16.5% to 15, supposedly costing some J$18 billion should go some considerable way to put more domestic demand back in play. It may be too little if the contractionary effect of a wider economic slowdown are felt in Jamaica as #COVID19 fears and facts affect many countries plus ours. We have fiscal space to give back so much, easily, because tax revenues have been over performing, considerably ($185 billion raised in taxes last year)–reflecting successes in raising compliance and willingness for some tax payers to come into the formal net–both good things, in a general sense.
With the smell of general elections in the air, it would be naive to not see this a vote-getter, notwithstanding any claims that it’s not so: it is what it is.
I don’t work for the Fund anymore and am not privy to any discussions, but I don’t see how the team sold the ideas to the Board that somehow Jamaica would be growing fast(er). A recent IMF focus had a piece entitled Jamaica: On the Path to Higher Economic Growth, based on an interview with Uma Ramakrishnan, former head of the IMF team for Jamaica, who was at least honest in saying ‘Growth has improved—supported by mining, construction, and agriculture industries but the outlook is weaker than envisioned at the start of the programs, and poverty remains high.’ Those are two worrying points. Economic stability is a great platform but it’s far from enough to move any major needles in Jamaica. Don’t get me wrong: I am thrilled that Jamaica became the IMF’s poster child–proud as buck. But, many a child star stands on the scrap heap once they’re grown up.
I’ve commented, recently (see What￼’s employment all about? Never mind the quality…feel the width), about something that politicians naturally want to crow about–the rising employment and falling unemployment rates and levels. Here, again, it’s important to think about what the IMF staff are saying: POVERTY REMAINS HIGH. I’m not going to get into some pecker-pointing contest about what the Living Conditions Survey shows about any recent year; the reality is a significant share of the country is in real poverty and that doesn’t look like changing soon. However, a concern I raised in why more people are working, and one relevant explanation, given that the economy appears to be stalling, is that poverty is driving people into the labour market. That’s not a good story, however, anyone may try to spin it. Several simple explanations can be behind that, including that remittances no longer cut it in keeping households afloat and they need some supplemental income support. The other aspects to the jobs growth story are (1) how it’s contributing to further erosion of labour productivity, if we just believed the raw employment and GDP growth data and (2) what kinds of jobs are being seen added. I’m not rubbish BPOs–far from it–but I do have a concern about what the new jobs are doing to really grow the country. Simple.
So, let’s see if Nigel can really cut a rug as well as he can roll out the cyaapet, and perhaps pull a big fat bunny out of the hat as we head into Easter. Excuse the mixed metaphors.