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Local News>Scotia economist sees turnaround for Jamaicans next yearSabrina Gordon - Business Reporter |
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Dr Warren Jestin, chief economist and senior vice president of Scotiabank International, says the Jamaican economy could begin to see green shoots in a matter of months, as its super trading partners shrug off their recession, but said its recovery would be slow.
"In terms of an outlook for Jamaica, I think that if the global economy recovers the way it is going, then (Jamaica) should get back into a more stable footing by the second half, maybe even the second quarter of next year," said Jestin, the keynote speaker at Wednesday's Private Sector Organisation of Jamaica (PSOJ) members luncheon in Kingston.
"By next year, at very best, we should get out of the recession ... and get to more of a floor being built right under the economy."
But, just as the developed powers are unlikely to return to growth rates seen in the last five to six years before the recession, Jestin also expects that Jamaica will feel the lag effects of the downturn in its key industries for some time.
"Unemployment will still be high, tourism will still be challenged; you won't see a turnaround in these fundamental industries probably until late next year or even the following year," he said.
Jestin noted that, while the bauxite sector is likely to see increase in prices in the range of 10 to 15 per cent with strong demand, any gains will be counter-balanced by rises in natural gas prices at the same time.
"We win on one side and lose on the other."
The International Monetary Fund (IMF) has forecast further contraction of the Jamaican economy by -0.2 per cent in 2010, which suggests a slowing of the decline, but not a recovery.
The latest internal report on the real economy by the Planning Institute of Jamaica (PIOJ) Wednesday reflected a 3.1 per cent contraction of GDP in the September quarter, and a reaffirmation that the economy would decline by 3.0 to 4.0 per cent this year.
Falling prices
PIOJ said, however, that conditions could be tempered by falling world commodity prices, particularly crude oil, as well as the prospects for completing an IMF agreement.
For the quarter under review, PIOJ reported that the goods-producing sector declined by 10.3 per cent, while services contracted by 0.5 per cent.
Mining and quarrying continue to take the brunt of the hit, registering a 58.9 per cent reduction, primarily impacted by the global recession and a reduction in demand for aluminium and alumina markets.
Total arrivals in the tourism sector was, however, up by 0.5 per cent, with stopover accounting for the more favourable outcome, moving upward by 5.5 per cent while cruise visitor arrivals decreased by 11.7 per cent.
Like Jestin though, the PIOJ reports some levelling off in the economy that has already registered at least four quarters of consecutive decline.
Breathing space
While Jestin concurred that the signing of the IMF agreement will give the country some breathing space, he asserts that some long-term adjustments are required ,regardless.
"Whether a deal is struck with the IMF or not, the issues still remains the same; at the end of the day the fiscal reality by itself will continue to be an issue and a drag on the economy," he said.
Jamaica's fiscal deficit up to September was approximately $65.8 billion, the size of which is partially a reflection of financing charges on the national debt of $1.3 trillion.
"Some very serious long-term planning is required - looking at what things are to be done in order to get longer term growth, and fiscal adjustments to get rid of that big deficit," Jestin told members of the PSOJ.
"Strategically, in a world which is becoming more complex, one where competition is becoming different and tougher in some industries, adjusting the economy to policies that allow for interest rates to come down and fiscal balance, are essential," he said.
sabrina.gordon@gleanerjm.com