Editorial | Supporting the ‘pivot’

Recent statements by Prime Minister Andrew Holness and his investment and commerce minister, Aubyn Hill, to pivot from macroeconomic stability to robust growth, are important, and perhaps overdue declarations of intent.

For it has long been clear and, as this newspaper observes, that, as critical as macroeconomic stability is, it is not of itself a sufficient condition for stimulating growth at the levels required to extricate Jamaica from its low middle status and to push the island further up the economic food chain.

Now that the government has articulated this policy, or, as Mr Hill put it in the Senate last week, “pivot to and focus on achieving an increasingly strong and sustained economic growth performance”, the next step must be to further flesh out what, despite Mr Holness’ outlines of some specific proposals, remains largely an embryonic programme.

It also raises the question of the administration’s attitude to Christopher Zacca’s call last month for a joined-up approach, involving the government, the political opposition, the private sector and civil society, in framing what, essentially, is an industrial policy with another name.

“This coalition must have a respected and influential voice at the decision-making table, ensuring that the hard choices we need to make are implemented for the benefit of all Jamaicans,” Mr Zacca, CEO of the financial services conglomerate Sagicor Jamaica, said at his October 31 induction into the Private Sector Organisation of Jamaica (PSOJ) Hall of Fame.

SIGNIFICANT GROWTH ELUSIVE

The case for the economic reforms started a dozen years ago, leading to today’s stability, as well as the need for the current strategic “pivot”, is incontrovertible.

After its sharp spurt of growth in the 1960s into the start of the following decade, Jamaica went through nearly four decades when annual GDP expansion averaged less than one per cent, and labour productivity declined at a similar rate. Most of its macroeconomic indicators, especially after the financial sector collapse of the late 1990s, pointed sharply south.

But, since 2012, starting with a massive tax package as a precondition for a standby agreement with the International Monetary Fund (IMF), the island, across political administrations, has turned around its macro indicators.

The country’s debt has been reduced from around 140 per cent of GDP to 72.2 per cent, at the end of the last fiscal year. It is projected to reach 60 per cent of GDP by 2026/27.

The country now has a positive current account balance of nearly one per cent of GDP, from a negative 13 per cent a dozen years ago, and the unemployment rate is 4.2 per cent, a historic low.

Yet, despite the tough measures and disciplined effort that were required to achieve this, significant growth has been elusive.

In 2023, at the tail end of a post-pandemic recovery, the economy grew 2.6 per cent.

This year, growth, after the impact of a hurricane and a slowdown in tourism, is expected to be negative, against a previously projected two per cent expansion. Expectations, going up to 2029, are equally underwhelming.

NATIONAL CONSENSUS NEEDED

Clearly, there is an emerging consensus that something has to change if Jamaica is to escape its state as a low middle income country, subsisting on low wages, low technology, low value-added, and low growth. Which, to be clear, is not an argument for jettisoning fiscal prudence and macroeconomic stability.

In a speech this week, Mr Holness talked about:

. addressing the island’s human capital, or the inadequacies in the education and training systems that hamper efficiency;

. economic diversification

. upgrading infrastructure;

. cutting government red tape;

. improving safety and security; and

. fostering inclusive development.

On a more granular level, he plans to revise the tax credit system for urban renewal projects; increase the threshold at which small businesses have to collect and remit the general consumption tax (GCT); establish a national infrastructure fund; accelerate public/private sector partnerships; and offer incentives to companies that innovate.

The specific tactical policies are relatively easy to implement, although the devil, as they say, is always in the details.

What is more difficult to create is the sound foundation upon which these policies rest – the six foundational pillars outlined by Mr Holness.

For instance, Jamaica has a long history of attempting, without great success, to fix inefficiency in the public sector. And its efforts of curing its crisis of public safety and security has been a seesaw ride, at best.

The large point is that, notwithstanding its demand that the government run primary balances that limited its ability to invest in the infrastructure and social services, the macroeconomic reform programmes worked because they enjoyed national consensus. The government, across administrations, the political opposition, private sector and civil society. coalesced around them.

The government’s “pivot”, if it is to be sustainable and have a chance of reaping the best possible success, must enjoy similar consensus. Which must be worked at.