Economic confidence returning, but...
Economic growth depends on real factors such as interest rates, and psychological factors, the most important of which is confidence.
Confidence, in turn, is an intangible which cannot be quantified but is a vital determinant of economic decisions which affect critical economic variables like savings, investment, production, inventories, imports and whether to hold US dollars or Jamaican dollars.
Nobody knows for sure what influences confidence among entrepreneurs, consumers, foreign investors and producers. The ingredients of confidence vary from a belief in the finance minister's ability to manage the economy, advanced bookings for tourist arrivals, public statements from the International Monetary Fund (IMF), to whether the economic data match the reality people are experiencing.
We should note that there is a large subjective element in pronouncements about the level and direction of economic confidence made by foreign and local pundits who claim to do surveys and canvass key economic players. We prefer to gauge economic confidence by a variety of indicators, primarily a combination of independent economic comments from reputable international organisations such as the IMF and by actual economic decisions about future economic activity.
We put much less weight on statements by politicians, public officials and private sectors leaders who are often trying to create economic confidence by talking up the economy in a favourable and optimistic way.
The IMF's most recent statement has certified that the Jamaican Government has met all the programmed targets, some of which have been very difficult politically. The rating agency, Fitch, has upgraded Jamaica's rating from B minus to B and described the outlook as stable. It upgraded Jamaica's long-term foreign currency and local currency Issuer Default Ratings to B minus from CCC and the short-term foreign currency rating from C to B. This reclassification has been picked up and publicised by the international financial press.
The tangible evidence, which is found across a wide cross-section of the economy, is even more reassuring than the prognostications of international organisations. The introduction of service by South West airlines from Atlanta, Baltimore and Orlando to Jamaica starting in July confirms the outstanding accomplishment of the continued growth of tourist arrivals. An air link with Brazil is expected to be in operation in time for the upcoming winter tourist season.
Sagicor's significant $9 billion expansion of its holding in the financial sector is firm evidence of confidence. Interest in doing business in Jamaica is attracting non-traditional investors and partners. Dredging of the Kingston Harbour, as part of the Government's Global Logistics Hub development, has elicited bids from global terminal operators -- Singapore Port Authority, Dubai Port World, and a consortium including China Merchant Marine.
The agriculture sector is to get a boost of $11 million from the Jamaica Agricultural Development Foundation from signing an agreement with the Japanese Government for the revitalisation of the sea-island cotton industry.
We congratulate Minister Peter Phillips and his team on their economic management, but caution them not to relax their discipline because their performance lies at the heart of the nascent economic confidence which has been long in coming, but could disappear overnight.