Jul 2010 Financial News

J'can economy 10 times worse than region

Jul 28, 2010

JAMAICA is projected to grow 10 times slower than the region in 2010, according to Business Observer analysed data from the Economic Commission for Latin America and the Caribbean (ECLAC) released last week.

The debt-ridden island is expected to grow 0.5 per cent this year whilst the average among Latin America and Caribbean nations is 5.2 per cent according to ECLAC's Economic Survey of Latin America and the Caribbean 2009-2010.

ECLAC which is one of five regional, commissions of the United Nations Economic and Social Council, stated that Jamaica will be constrained by debt whilst that the region will benefit from increased investment, consumption, lending and exports.

"It is expected that growth will be 0.5 per cent in fiscal year 2010/2011," stated ECLAC on Jamaica. "This growth rate projection is based on the country meeting tight fiscal and monetary policies designed to adjust the Jamaican economy within the context of International Monetary Fund (IMF) scrutiny and review. From the first review of the targets under the programme it appears that all the targets were met, including a variety of structural reform."

The IMF and Government signed a US$1.3-billion standby arrangement in February this year in order to provide budgetary support for the Government which had its tax revenues slashed due to a contraction in the bauxite and tourism sectors. Whilst Jamaica suffers the growth of the region on average will be in line with the emerging economies of Asia, "one of the most dynamic regions in the world", stated ECLAC.

The highest growth rates in 2010 are in South America, led by the biggest economy in the region, Brazil with projections at 7.6 per cent, followed by Uruguay at 7.0 per cent, Paraguay at 7.0 per cent, Argentina at 6.8 per cent and Peru at 6.7 per cent. It stated that other countries in the region will have lower growth rates, such as the Dominican Republic at 6.0 per cent, Panama at 5.0 per cent, Bolivia at 4.5 per cent, Chile at 4.3 per cent and Mexico at 4.1 per cent. Colombia at 3.7 per cent, Ecuador and Honduras at 2.5 per cent, Nicaragua and Guatemala 2.0 per cent. Countries with notable declines in growth include Haiti projected to experience negative 8.5 per cent and Venezuela at negative growth 3.0 per cent.

"This growth rate is higher than expected, but economic performance in the region is very diverse. What stands out are the members of Mercosur and countries with greater capacity to implement public policies, as well as those with strong domestic markets spurred by regional activity and their exports to Asia," stated ECLAC Executive Secretary Alicia Bárcena during the launching of the report Economic Survey of Latin America and the Caribbean 2009-2010 in Commission headquarters in Santiago, last week.

Prospects for the 2011/12 fiscal year will see the growth gap between Jamaica and the rest of the region reduced. Specifically, the island is projected to grow at half the rate of the region at 2.0 per cent compared with 3.9 per cent respectively according to ECLAC. The waning capacity needed to support the economic activity is blamed for the projected deceleration in regional growth in 2011.

"At the same time, governments are facing a waning capacity to keep the current counter-cyclical measures in place without sacrificing the achievements in terms of maintaining macroeconomic equilibriums. In light of these considerations, growth estimates for 2011 are 3.9 per cent for the region as a whole," it stated.

ECLAC has also appealed to member nation to maintain public policies geared at protecting the most vulnerable "as part of a broader strategy that encompasses not only social areas but also macroeconomic and production policies".

ECLAC noted that countries which grew prior to the global economic downturn are the ones which are benefiting from rapid growth today. Jamaica would not be among them, as the island trailed the region in regard to growth, foreign direct investment (FDI), debt reduction and other data over eight years. In fact, in 2009 Jamaica recorded the second highest inflation rate and the sixth lowest estimated growth rate among 33 regional nations in 2009, according to ECLAC's Annual Statistical Yearbook.

"The macroeconomic soundness observed in most countries of Latin America and the Caribbean in the years preceding the global crisis made a significant difference. Governments made the most of a period of exceptional international economic and financial boom to straighten their public accounts, reduce and improve the profile of their debts and increase their international reserves," stated ECLAC. "This process allowed them to apply counter-cyclical public policies that contributed to economic recovery starting the second half of 2009."


Source:
STEVEN JACKSON
jacksons@jamaicaobserver.com
Business writer
Jamaica Observer
Wednesday July 28, 2010

http://www.jamaicaobserver.com/business/J-can-economy-10-times-worse-than-region_7829358