Mark Ricketts | Growth in 2019 steady, not robust

It would be so nice if when forecasting the country’s annual growth performance I could draw on the platitudes and unrestrained optimism of government leaders, where every project is a winner and every capital investment is a star.

The Logistics Hub Initiative (LHI) is slated to be a US$28-billion undertaking eventually and the Aerotropolis Vernamfield is forecast to be US$2.5 billion. Alpart, our old bauxite alumina plant, which had been our lady-in-waiting as it was mothballed, is now our Prince Charming, with resuscitation of the plant by its new owners JISCO, as well as expectations of capital expenditure of US$3 billion on a state-of-the-art circular industrial park.

These expected capital outlays are bolstered by the language of assured success by Prime Minister Andrew Holness who points out that “news about our performance is not superficial; profound changes are taking place in our economy”, and Finance Minister Dr Nigel Clarke who says, “the country is in an extremely good space right now”.

Macroeconomic stability has now been entrenched and the country has recorded a succession of quarterly positive growth spanning both administrations. Our weakness, however, is that we can’t combine all these quarterly gains into something substantial as far as annual growth rates in concerned. In boxing parlance, we can’t translate our barrage of jabs into the real knockout punch that could allow us to register a four per cent or five per cent annual growth rate.

Some three years ago we salivated about a five per cent target by next year. We infused the society with its inevitability by rehearsing and repeating the phrase ‘five in four’. Unfortunately, robust growth has eluded us and this year there are concerns.

Mining and quarrying, which was expected to be an outstanding performer, could fall below expectations.

For one, with commodity prices sagging on the global stage, we are not likely to get any significant boost from sharp increases in aluminium prices.

Second, so much of our physical plant had been sidelined that sustaining optimal production is proving more demanding and costly than initially forecast.

ONGOING ISSUES IN THE MINING SECTOR

JISCO got the old Alpart plant up and running and for most of last year it recorded impressive year-over-year gains, especially as the plant got a late start in its 2017 reopening.

But in December 2018, the last of JISCO’s five boilers succumbed and production was halted temporarily. Undoubtedly, 2019 will produce challenges in reconciling output, operations, plant capacity and efficiency.

As with JISCO, there are ongoing issues in the mining sector with New Day, Windalco, and Noranda, and hopefully capital and labour, management and staff, owner and worker can forge compromises, make unheard-of adjustments, and backpedal from rigid and orthodox positions. Threats and exhortations are dismal substitutes for solution-driven commitments, irrespective of the cost.

There tends to be a correlation between the performance of the industry grouping of agriculture, forestry, and fishery, and the overall economy. With agriculture underperforming in relation to expectations, the economy has been less than buoyant. This year will likely be not much better with low coffee prices, two or three sugar estates closed, and a sense of not knowing, as far as Monymusk is concerned.

While farmers work very hard, agriculture is handicapped by insufficient or inadequate markets and marketing, grading stations and storage facilities, infrastructure and equipment, technology and capital goods. There is also praedial larceny, the absence of crop insurance, and assured credit.

Linkages arising from record growth in tourism, and the recent UK-funded irrigation project in Essex Valley, St Elizabeth, a parish where farmers create miracles with the land, provide reasons for hope. Also encouraging is JAMPRO’s recruitment of UK-based business expansion specialists, Newer Worlds, to develop a five-year strategy for Jamaica’s agribusiness industry.

Incentives could arise from our depressing statistics, where food is a large percentage of our worrisome trade import bill, which for the first 11 months last year was far in excess of US$5 billion, versus our paltry exports of less than US$2 billion. Surely this gives us opportunities, together with downward pressures on our dollar, for import substitution and accelerated increases in exports.

INSUFFICIENT RESEARCH AND UNDERINVESTMENT

Deep-seated growth bottlenecks make it hard for us to break out. Many of our most talented migrate. Construction appears robust with cranes, and building blocks, and ‘barber green’, and steel, everywhere, but the high import content of the final product means that leakage can be as high as 90 per cent, with the majority of the growth registered in the economies of our overseas suppliers.

With tourism and manufacturing, more than 70 per cent of the money spent on product and services flow overseas to foreign investors and/or external service providers.

There is also the reality of insufficient research and underinvestment by the private sector. Additionally, there have been misplaced priorities by our leaders and bad governance rooted in partisan loyalty as against competence. This week’s report of our continued slide in the rankings of Transparency International Corruption Perception Index is an affirmation of this.

Among the industries expected to record growth are hotels and restaurants; electricity and water; real estate, renting, and business activities; finance and communication; and repairs, installation of machinery and equipment.

The hotels and restaurants industry has been a winner and should continue its record-breaking pace in terms of arrivals and earnings. Over 89,000 new seats from the US market and another 31,000 from other destinations augur well for 2019.

Adding to tourism’s 32,000 room stock, ground is being broken this month by the Spanish hotel chain Princess Hotels and Resorts for 2,000 rooms at a price tag of US$500 million as well as H10 hotels spending $250 million on its 1,000 rooms.

Electricity and water should record impressive growth because of National Water Commission’s commitment to greater efficiency and improved distribution and Jamaica Public Service’s shift in fuel type, which should lower costs, thereby increasing demand and consumption.

Our winning streak of quarterly gains will continue and GDP growth for 2019 should come in at 1.9 per cent.

- Mark Ricketts is an economist, author, and lecturer. Email feedback to columns@gleanerjm.com and rckttsmrk@yahoo.com.