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EGC points to growth, but warns against complacency

Monday, August 27, 2018

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THE Economic Growth Council (EGC) has pointed to improvements in the country's economy over the last quarter, but says more needs to be done in order to attract and retain the type of investments that will lead to its target of five per cent GDP growth by 2020.

“For example, the largest pool of investable funds in this country, currently valued at over $600 billion, lies in the pensions and insurance industries. This is approximately one-third of Jamaica's current GDP. Currently these funds are mainly invested in low-yield government securities and financial instruments,” ECG Chairman Michael Lee-Chin states in the council's sixth-quarterly report to the nation. (See full text on Pages 15 & 16).

“This pool of capital needs to be un-incarcerated, and we have been imploring the Financial Services Commission (FSC) from 2016 to act. They did in early 2017, but subsequently a “study” was requested, which was due at the end of June 2018. We are now told that the scope has been increased, which will put the conclusion now to March of 2019, two years later,” Lee-Chin stated.

“I implore the minister of finance and the FSC to do what's necessary to expedite the completion. We cannot afford to have long-term capital be legislatively locked, which is unlike other countries such as the US, Canada and Norway,” he added.

Lee-Chin also pointed to delays in the court system and bureaucracy affecting the development and building application approval process as two areas that need urgent attention as they impact on investment decisions.

He said the EGC is working with the justice ministry on the court system, and he appealed to the leadership of municipalities to clear up the backlog of projects that are lingering in the bureaucracy and retarding growth.

On April 27, 2016, when Prime Minister Andrew Holness announced the creation of the EGC, Lee-Chin said then that the council would work at achieving five per cent growth over the next four years.

In his quarterly report Lee-Chin noted that the EGC has, over the past two years, held more than 340 meetings with stakeholders, as the council's task was first to listen.

“We collated the stakeholders' feedback and prescriptions into eight growth initiatives and 111 sub-initiatives,” he explained. “We printed and distributed these in our 'Call to action' report, which has become the basis for the legislative agenda of the Government.”

He said that among the targets of the eight policy initiatives summarised in the report are: to maintain macroeconomic stability and pursue debt reduction, improve citizen security and public safety,remove profit from crime, reorganise the police force, accelerate reform of the justice system; thoroughly address social exclusion, strengthen border control and maintain territorial integrity, improve access to finance, and pursue bureaucratic reform to improve the business environment.

Among the economic improvements Lee-Chin pointed to in the last quarter are:

a. Tax collection has exceeded the target for the first quarter of the 2018-19 fiscal year — $79.9B or 9.2 per cent above the $73.2-billion target. The Tax Administration Jamaica is on track to exceed the annual target of $320B.

b. Bank of Jamaica has lowered the policy interest rate to two per cent, the eighth- consecutive decrease of 50 basis points (or 0.5 per cent) since 2016.

c. Inflation fell below the targeted four per cent to six per cent for the month of June 2018 at 2.8 per cent.

d. Net International Reserves reached its highest level at US$3.7B in August 2017 and is currently at US$3.14B.

e. Debt-to-GDP ratio has fallen to 105 per cent and is projected to dip below 100 per cent by the end of the fiscal year 2018-19.

f. Both Fitch and Moody's credit rating for Jamaica stand at B, and the outlook in both cases has improved from stable to positive in 2018.

g. Unemployment was recently reported at 9.7 per cent for the first quarter of the 2018-19 fiscal year (the end of June 2018), the lowest in over 10 years.

h. The second-quarter 2018 data of the Survey of Business and Consumer Confidence continues to highlight a sustained period of confidence amongst both groups, with an average of 150 points. This represents the highest recorded since the start of the survey in the second quarter of 2001.

i. Poverty rate has decreased from 21 per cent to 17 per cent in 2016. This represents a 19 per cent drop in the incidence of poverty, the largest annual reduction in 10 years.

j. GDP growth of 1.8 per cent.

“These metrics are pillars that we can stand on,” Lee-Chin said. “Slowly we are beginning to build investor confidence — that potentially Jamaica is a place where they can come and do business.”

But this confidence, he insisted, must be exploited.

“We must not get complacent because we have a whole 3.2 per cent to go, and we still have the live, work and raise families aspect of Vision 2030 to accomplish as well.”

The country, he said, is “seeing green shoots in the economy”.

“We have all sacrificed to have got to this point of achieving the benefits of fiscal reforms. We are now being encouraged by increasing GDP results. We now should be encouraged by the results and redouble our efforts to drive and push and be relentless in our focus. Economic growth will be the panacea to most of our problems... Success is going to require the effort of every citizen. We all now have to put our best foot forward and continue to build on the achievements we have worked so hard for since 2013,” he said.

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