FORECASTING JAMAICA’S ECONOMIC GROWTH (GDP) RATE FOR 2021 OF 4.56 %: IT IS TIME TO MAKE THE DOLLAR ROLL
This growth projection is conditional on maintaining a stable and appreciating exchange rate to encourage value-added investments in the economy by 2021; “let the dollar roll”. Successive gains in the economy over the years have always been followed by deep depreciation in the exchange rate completely wiping out previous gains.
Remittance Direct Investments (RDI) have the effect of adding wealth and value to the Jamaican economy with the overall impact of increasing the value of the dollar by impacting household consumption and Gross Domestic Product (GDP). .As Jamaica is a consumer based economy driven by RDI traditional approaches to economic growth seems to have consistently undermined the core foundation for real growth hence our current macroeconomic framework are not in line with the main driver of the economy which is RDI.
Jamaicans Overseas contributed some US$9.4 Billion in economic activities and provide some US$1.6 Billion to Jamaica’s Tax Base. Instead of building on this huge transfer of wealth the Government since the 1990’s effectively transfers the value added to the economy by hard-working Jamaicans overseas to wealthy foreign investors and the cost of the write-off onto the debt stock whenever the dollar is devalued. This represents some US$32 billion over the last 25 years.
We need a new economic development model base on rebuilding our middle class through manufacturing and not import substitutes. Import substitution is a failed economic policy which continues even today, “The economic advantage of exporting at a high price and importing at a much lower price no longer exists hence our trade deficits”. Manufactured and semi-manufactured/processed goods imported and repackaged to the people are not valued added productions to grow the Jamaican economy, yet these are the sectors the government incentivized.
Our economic reform programme must ensure that not only businesses are empowered but people have a reason to believe their lives will improve. Government is placing too much emphasis on sectors having diminishing marginal returns and in so doing consistently wipe out gains in the economy to incentivized these non-productive sectors. We must adjust our economic policies to conform to non-traditional investments like RDI with less focus on interest rates and inflation and more on allowing the dollar to appreciation.
by Silbert Barrett
