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Financial News

Oct 2008 Financial News

Global financial meltdown - Don't panic, but ...Jamaica will take a hit - Golding

Oct 10, 2008

Prime Minister Bruce Golding has admitted that the global financial crisis will affect some of Jamaica's critical economic structures, despite Shaw's earlier claims that the country would face minimal impact. However, he is steering away from instigating panic.

In his prepared address to an audience at the 40th annual awards banquet of the Jamaica Manufac-turers' Association last night, Golding said the budget was vulnerable as it was predicated on securing US$250 million (J$1.8 billion) from the external market. But the market is currently gasping for life. "The forecast for market con-ditions at this stage is uncertain, given the liquidity crisis in the capital markets," Golding said. He, however, remains optimistic that Government will still secure the funds. "Our reputation is strong. The Government is currently in discussions with external sources and I have reason to be confident that those funds will be secured," Golding said.

The prime minister also said Jamaican bonds could be in trouble, but again was wary of expressing pessimism. He said while Jamaican bonds were likely to be affected by low confidence in the world market, the impact could be minimised by the country's strict fiscal controls.

"Given the limitation on global financing, it is important for us to maintain our deficit target and despite the pressures for additional expenditure to meet hurricane damage and public-sector wage adjustments, we continue to exercise stringent fiscal controls," read Golding's text. He said that, up to the end of September, the deficit was less than projected.

Golding for the first time also acknowledged that remittances and tourism were bound to be directly impacted by the crisis, but stood firm that the effects would be less than anticipated. He said that, while remittances would be less than expected, it would still record an improvement over last year's earnings. Remittances record in the region of US$2 billion (J$146 billion) annually. Likewise, a net decline is not being expected for tourism.

"We are not anticipating a net decline because of the strength of our brand, the intensity of our promotional activities and the fact that the cost of air travel should begin to reflect reduced fuel prices which increased 70 per cent over the past year," he said. However, there will not be strong improvement in stopover arrivals, Golding admitted. The prime minister was also confident that inflation would taper off in response to declining world prices on the market. "We are already seeing this in falling prices for oil, corn, wheat and other critical imports," Golding said.

Yesterday, guests at a Gleaner Editors' Forum at the newspaper's North Street offices examined the impact of the international financial meltdown on the Jamaican economy. There was general agreement that Jamaica must be astute in how it deals with money matters at both the national and personal levels as uncertainty in the global marketplace sends tremors through some sectors.
Economic instruments likely to be affected:

Exports
Global demand is expected to decline and, as consumer spending contracts, this will affect local exports. It is difficult to measure the extent of this impact since the level of demand will vary from one market to another and from one product to another.

Balance of Payments
Our balance of payments could be adversely affected. I say "could" because while the impact will be negative if there is a fall-off in exports and reduced prices for our exports because of the decline in global demand, it could have a positive impact on the import side (e.g., reduced prices for imported oil).

Investment
It is too early to determine the precise impact on foreign investment projects. To the extent that these are dependent on financing from the international capital markets, they will perhaps be affected by the liquidity crunch in the banking system.


Source:
The Jamaica Gleaner
Friday October 10, 2008
http://www.jamaica-gleaner.com/gleaner/20081010/lead/lead1.html