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PNP worried about weak growth, increase in poverty

Saturday, September 21, 2019

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THE Opposition People's National Party (PNP) says while it is pleased that Jamaica has completed its IMF programme after six and a half years spanning two political administrations, it is concerned that the programme's significant fiscal and structural reforms are not delivering the higher levels of economic growth and reduction in poverty that were anticipated from the successful execution of the programme.

The recent trends are not encouraging. Gross Domestic Product (GDP) growth for the second quarter of 2019 was one per cent, falling from 1.7 per cent in the first quarter, a release from the PNP said yesterday.

“The lay-offs and impending closure of Alpart, the duration of which is uncertain, will have a further dampening effect on economic growth. Similarly, this year's adverse weather conditions may well impact negatively on growth in agriculture, underscoring the need for measures to mitigate the ongoing effects of climate change,” said the PNP.

“Prosperity remains an illusion for all but the privileged few. The latest available data (2017) show that poverty increased by 2.2 percentage points to 19.3 per cent, an unwelcome reversal of the trend in poverty reduction over the preceding three years,” said the party.

It added: “The Bank of Jamaica's (BOJ) aggressive monetary policy, driving down its policy rate to 0.5 per cent on Jamaican dollars funds and reducing the cash reserve ratio to release additional liquidity to the banking sector, is not yet showing an impact on economic growth, though we note that inflation jumped in July (1.1 per cent) and August (0.8 per cent).”

Meanwhile, the PNP said growth in liquidity from this monetary policy is being channelled into foreign exchange purchases to finance greater imports, amounting to US$2.77 billion (up by 15.1 per cent) from January to May 2019 (the latest available data). This, it said, has worsened Jamaica's trade deficit, as the much smaller volume of exports (US$751 million) only grew by 6.3 per cent over the same period. It has also flowed into inflated asset prices in the equities and real estate markets, at a time when Jamaica has not been achieving robust economic growth.

In contrast, the party said manufacturers and exporters have recently stated publicly that the productive sector is being starved of the resources needed to drive growth.

“The JMEA (Jamaica Manufacturers And Exporters Association) has said that some of their members are still borrowing at 20 per cent per annum and above, despite the reduction in the BOJ's policy rate to 0.5 per cent per annum.

“In the post-IMF era, it cannot be business as usual if Jamaica is to get out of the rut of low growth, national despair amidst increasing poverty, and intolerable levels of violent crime,” said the PNP.


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