One year on, pundits divided on Holness’ steering of economy

Financial strategist Dr Adrian Stokes has described the Holness administration’s management of the economy since it romped to a landslide victory in the September 3, 2020 general election as “solid”.

Stokes argued that the key macroeconomic variables are trending well, “so much so that the external perception of Jamaica’s credit risk has improved relative to 2019”.

However, a senior trade unionist and political commentator have given the Government a low score for its stewardship of the economy owing to its mishandling of the COVID-19 pandemic.

Looking ahead, Stokes said that vaccine hesitancy poses a serious risk to economic recovery. He noted that most of the economic slowdown was self-imposed as a result of the COVID-19-containment measures.

“These measures are likely to remain in place until we get to a much wider take-up of vaccines,” he added.

Stokes highlights slow gross domestic product (GDP) growth as a problem, arguing that although there has been some recovery in growth off a low base, the economy is expected to remain below its 2019 peak level for at least another two years.

“This means the labour market will remain weak and unemployment will continue to be elevated,” he said.

The financial strategist suggests that the Government pursue a delicate policy mix where the economy can find room to operate, while containing the spread of the virus.

Stokes also observed that inflation is trending towards the upper end of the Bank of Jamaica’s (BOJ) band of between four per cent and six per cent, but noted that the reasons are transitory and not linked to policy errors.

“In fact, it would be a policy mistake if the BOJ were to respond with tighter monetary conditions in the face of elevated but transitory inflation dynamics,” he said.

Turning to the macroeconomic variables, Stokes said that the net international reserves has increased to US$3.36 billion as at the end of July 2021, relative to US$2.76 billion at the end of the same period last year.

“The fiscal situation is improving, with tax revenues growing 22 per cent year-over-year at the end of July 2021. This has led to the fiscal deficit doing much better than programmed and the primary balance outperforming budget.”

He also observed that the total taxes collected up to the end of July 2021 were comparable to the amount for the similar period in 2019.

Trade unionist Helene Davis Whyte is of the view that the calling of an election in September last year adversely affected the economic outlook.

“It worsened the situation with the pandemic, so you would have gained and then you were almost put on the back foot,” she said.

Davis Whyte indicated that a glimmer of hope came with the limited reopening of the tourism sector, which resulted in some improvement in earnings in the government coffers as visitors started returning to the hotels.

Davis Whyte said that the Holness administration fell down in terms of its management of the pandemic and its impact on the most vulnerable.

“Yes, we had the payouts that were made, but I don’t think enough was done,” she added.

Commenting on the primary balance surplus that exceeded the budgeted balance by $26.4 billion, the senior trade unionist said that a significant amount of this money should be used to assist the most vulnerable, as well as workers severely affected by lockdowns.

“We have not brought back most of the jobs that went with the pandemic … . Money was paid to some hotels for them to keep people employed … but based on the number of persons who became unemployed or underemployed, the Government should have done more to assist,” Davis Whyte.

She commended the administration for establishing a multi-stakeholder economic recovery task force which, among other things, crafted plans to achieve speedy economic recovery in the wake of the devastating impact of the pandemic.

Discussing the lockdowns announced by the prime minister to slow the rapid spread of the virus, Davis Whyte said it was difficult for employers to continue to pay workers during lockdowns, especially for the worst-affected businesses.

She disclosed that she has been informed by workers in the private sector that their employers were threatening not to pay for the lockdown days or withdraw them from vacation-leave allocations.

Rating the Government’s performance in managing the economy since September 3, 2020, Davis Whyte gave the administration a score of five out of 10.

Political commentator Shalman Scott argued that while the Planning Institute of Jamaica reported a 12.9 per cent real gross domestic product growth for the April to June quarter, it would take some time before the economy rebounded to pre-pandemic levels.

Noting that the country’s battered economy was forecast to rebound by 2023, Scott said that “one of Jamaica’s foremost problems was its vulnerability to negative external factors that impact our economy”.

Scott said that the pandemic had worsened Jamaica’s capacity to offer basic services for its people.

“The Government is batting on a very difficult wicket, but the prime minister’s statement [last] Wednesday acknowledging that a number of missteps have been made is very commendable ,” he said.

The political commentator gave the Government 3.5 out of 10.

Last Friday, the Ministry of Finance and the Public Service reported that the Government’s fiscal operations over the four-month period April-July 2021 generated a primary balance surplus that exceeded the budgeted balance by $26.4 billion.

“Given this higher-than-programmed performance of revenues, the Government is currently in the process of formulating the first Supplementary Budget through which it will address critical needs of the country that have emerged since approval of this year’s Budget,” the ministry stated.

Finance Minister Dr Nigel Clarke said that the first Supplementary Budget for the current fiscal year would address crucial financing requirements of the health sector.

The first Supplementary Budget will be tabled in Parliament by the end of the month.

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