Business leaders share thoughts on 2020 and 2021

Sunday, December 27, 2020

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As Jamaica joins the world in bidding goodbye to a most challenging year, the Jamaica Observer asked three of the island's most respected voices in business and finance to reflect on 2020 and make some projections for 2021. Here are their responses.

Richard Pandohie

President, Jamaica Manufacturers and Exporters Association

Twelve months ago, Jamaica was on a high; all the key indicators were moving in the right direction and there was strong optimism that 2020 was going to be the breakout year. But then COVID-19 happened, and we have experienced the worst economic decline in our history and the global economy is also facing its worse state in a century.

However, despite the absolute hardship that the tourism, hospitality and creative sectors have suffered, the overall economy has performed better than my own expectation. The BPO sector is almost fully back, remittances have overperformed, construction sector has not slowed, manufacturing sector more or less held steady and, in general, we have seen many businesses getting back to 75 per cent to 85 per cent of their pre-COVID level.

Highlights of 2020:

• The Government of Jamaica/Ministry of Health and Wellness reaction to COVID in the early months was measured and decisive and played a big part in Jamaica not having greater economic fall-out.

• As a country, the financial discipline of prior years allowed us the fiscal space to support our most vulnerable citizens and to have a net international reserve that kept US dollars more or less available and within a reasonable band.

• The decisive mandate given to the Jamaica Labour Party at the general election, which gives them huge autonomy to make strong decisions which will be critical to our recovery process.

• Manufacturing sector producing to keep Jamaica supplied with many essential goods, keeping Jamaicans employed in quality jobs, finding new export markets and pivoting to produce new products.


• The terrible murder rate and the severity of violence in our society.

• Nine months in the pandemic and we still seem to be shell-shocked. No major roll-out of strategy/policies to strengthen the productive base which will allow us to build back better and more resilient.

• Widening social inequity, especially with regards to education. So many children have lost the year.

What the future holds for Jamaica in 2021

I believe despite the optimism around the COVID-19 vaccine, Jamaica's downside risk remains high, especially for the period January to September 2021. I expect COVID to have its worse numbers in Q1, reflecting post-holidays spike and therefore anticipate further enforcement activities that will negatively impact the economy. I do not see schools reopening before September 2021.

We urgently need bold and pragmatic policy decisions to put our economic recovery on a sharp and sustainable growth path. For example, we need:

• More production in the agricultural sector; leased Government lands that are not being utilised should be taken back and put into production.

• A massive export thrust. We are not earning enough and will continue to be in a vicious cycle of devaluation that will continue to undermine our quality of life and keep our people poor. If we are not using the competitive dollar to expand export and create the positive knock-on effects of more production, more jobs and more revenues to GOJ, then it is a waste of time and counter-intuitive.

• We have had poor and declining labour productivity for decades, this is a must fix (through R&D, use of more technology, more educated workforce) if we are to recover strong. No policy implementation to drive this, despite numerous statements.

• We need better partnership between public and private sector we are still operating as silos with a huge trust deficit.

• Very importantly, we need to focus on creating an enabling environment for micro and small entrepreneurs in the productive sector (inclusive of the creative sector) to allow them to truly be the engine of economic growth.

I am hopeful that Jamaica will start seeing real recovery by the last quarter of 2021, but the reality is that the way our economy is set up now, our recovery will not happen until tourism starts recovering. So, I am expecting more of the same in 2021 with a focus on survival for most businesses.

Christopher Williams

President and CEO, Proven Management Limited

Key for 2020 is digital

The pandemic forced us all to confront the digital reality, both from customer servicing and operating efficiency standpoints. The response from customers and team has been outstanding. Customers have quickly transitioned to a digital world, and communications via digital platforms have seen mutually valuable interactions.

On the operating side, we have been able to drive efficiencies through our various portfolio companies by navigating our operating systems on a technology and digital base; and we are very happy with the outcomes. We embrace how the coronavirus pandemic has driven the digital and technological reality and we are pleased with this evolution.

In 2021, we certainly look forward to the return of normalcy, particularly in travel and tourism. Being an open economy and with our dependency on the tourism sector in the Caribbean, its viability and its ability to rebound will result in a positive drive in GDP growth to reduce deficits seen in 2020; also allowing for the manufacturing and linkages sectors to return to some levels of normalcy.

For 2021 the hope is for the COVID-19 vaccine to traverse the various societies quickly so that business and pleasure travel can return, as this will help to stabilise the socio-economic prospects alongside most of our portfolio companies, as we depend on the tourism sector and its employees.

I hope for renewed wealth and health for all.

Be safe, everyone, and continue to play your part.

Therese Turner Jones

IDB Country Representative Jamaica

General Manager, Country Caribbean Group

A Caribbean/Regional perspective

For most Caribbean economies, the coronavirus pandemic is translating into the deepest single-year contraction of real GDP on record. With the exception of Guyana, countries have experienced deep recessions, severe increases in unemployment, and long-lasting damage to many corporate and household balance sheets.

The social consequences of the crisis continue to mount, and despite governments' best efforts to buffer the shock to families, enterprises, and domestic markets, there remains a dire need for continued and more broad-based stimulus to ensure that economic capital — both human and otherwise — remains intact.

As in other countries around the world, the required containment measures negatively affected short-run economic growth. At least in the Caribbean, the containment measures were much more successful in limiting community transmission of the virus, as compared to most of the rest of the world. In addition, the Caribbean economies suffered from external shocks, both for the tourism-based economies and in the natural resource-based economies.

In the spring of 2020, as the virus spread around the world, and borders closed, we focused our analysis on one critical sector that is of particular significance for many Caribbean economies tourism.

For Jamaica, Barbados and The Bahamas, tourism's total (both direct and indirect) contribution to GDP ranges from about 1/3 to nearly half. It was clear that, as borders closed, a sharp economic contraction was inevitable.

For commodity exporters in the region, the global economic shock has produced an external shock in the form of lower commodity prices — especially for oil (about 20 per cent below last year's average price) and natural gas, although the latter has recovered somewhat.

That said, it has been a year of opportunity. Governments across the region adapted quickly by digitising important processes to serve citizens through the crisis. Businesses also got closer to their clients by taking services online and expanding to new markets in the digital space.

Citizens adapted to technology for government and commercial transactions, work-from-home, and online education. In Jamaica, for example, the Government partnered with media houses and Internet service providers to present learning curricula virtually. Similarly some care stimulus grants were also issued digitally.

The pandemic also emphasised the need for resilience across the society. This shift in paradigm is informing public and private investments that are climate-smart, gender-balanced and make full use of the tools of technology. It also served as a wake-up call to redouble efforts to decarbonise national development strategies, especially in oil- and gas-producing economies, since global decarbonisation will lead to softer demand and lower prices for these commodities.

Finally, it was also a wake-up call to reinvigorate downstream linkages from the tourism sector in order to increase the value-added from the sector once tourists return to the region. The lessons from 2020 are helping the countries of the Caribbean to create a more sustainable and resilient future.

A Jamaican reflection

Tourism-based economies are all experiencing a double-digit decline in GDP this year, and Jamaica is no exception. In fact, this was the largest recorded single-year contraction of GDP on record. The next most severe shock took place in the mid-1970s, during the global oil crisis. Jobs have been lost. Incomes have fallen — particularly for the most vulnerable populations. Private investment has slowed considerably.

If not for timely and well-designed interventions on the part of the Government of Jamaica, the shock would have been considerably more damaging to households and businesses. These interventions were supported by international partners such as the IDB, and the fiscal consequences of these measures have been dampened by the successful efforts of this and the previous Government to reduce debt and build buffers against future shocks.

But the work is not done. The Government of Jamaica must continue to work with international partners to deliver more stimulus and well-targeted investment to help the economy navigate these uncharted waters, and to ensure that Jamaicans and the country's productive assets remain intact and viable, so that they can quickly resume their contribution once conditions abroad begin to normalise.

As always, the IDB stands ready to provide both technical and financial support to the Government and private sector, with the aim of ensuring that Jamaica emerges from this crisis in the best possible position to continue its path towards more rapid and inclusive development.

What the future holds for Jamaica in 2021

Moving forward, prospects for the tourism sector depend upon global progress in controlling the novel coronavirus, the effective distribution and vaccination of populations in key source countries, and Caribbean countries' own ability to maintain sanitary protocols and limit both imported cases and community transmission, as they have succeeded recently.

Work is under way to ensure that the tourism sector is well prepared and well positioned to attract tourists once the virus has been contained. This will likely mean tailoring to new health and safety concerns and priorities. Making sure that the sector and government work together will be crucial. As mentioned before, the Government will need to continue providing support to the economy, including the most vulnerable populations. This will need to be a more forward-looking exercise than it has been in recent months.

The priority now is to keep the economy intact so it can return to growth once the crisis dissipates, but also accelerating the kinds of public investment in key sectors that have long been acknowledged as crucial for the future. Never before has reducing bottlenecks to sustainable growth been more important.

This kind of smart investment can serve the dual purpose of stimulating the economy in the near term through crisis recovery, while also setting the stage for the kind of productivity growth that will be required over the next decade to ensure that the Jamaican economy fulfils its potential in terms of improving lives.

— Compiled by David Rose

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