THE SAME day last week that the news broke that the Finance Ministry had once again floated a successful bond offering in overseas financial markets, the economy got a body blow with the results of the latest Business Confidence Survey indicating a sharp fall in confidence.
Actually business confidence plunged in the third quarter to 97.2 per cent down from 122.8 per cent in the previous quarter the lowest level it has been over the past four years. The main factors fuelling the decline were the heightened inflation, weak consumer demand, the lack of appropriate government policies and not surprisingly, the impact of crime and violence on business conditions.
As if these results were not worrying enough, on the very day the results were released, there were press reports that a leading overseas business publication had ranked Jamaica as being the number one murder capital of the world, surpassing Colombia and South Africa.
The nexus between the spread of crime and the inability of the society to function at normal levels has often been the subject of commentary in these columns.
We cannot expect businesses to flourish and consumers to spend with any sense of long-term commitment, where they feel they are constantly under threat and having to look over their shoulders often for the next gunmen.
At the same time, regarding possible solutions to problems in the domestic economy, business owners, while conceding that there were negative external factors outside of the local economy, argued that there were policy changes that could be introduced to stimulate buoyancy in the local economy. Specifically, business persons captured by the survey recommended that Government should adopt flexible fiscal and monetary policies such as tax cuts and reduced interest rates. In their view, this would ease the burdens on the producers while tax breaks for consumers would also serve to revitalise sagging consumer demand.
Professor Curtin, while presenting the latest results, noted that, were the Government to send a signal that it planned to deal decisively with crime, even without addressing the economic issues, confidence could be restored relatively easy.
While we understand the validity of this strong point, the main limitation with this, however, is that dealing with crime and its associated social problems will definitely have implications for the budget. The protracted police wage negotiations is one indication of this. Whatever may be the solution, however, the Government has to move quickly to restore business confidence for as we all know, over time the perception can be worse than the reality. And of course, perception can easily become a self-fulfilling prophecy.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
