Comments on the Progress of the Jamaican Economy
Ambassador Curtis A. Ward
(02 June 2019) — I was asked by the Editor of the Latin America Advisor, a publication of the Latin American Dialogue, to respond to a question on the positive economic growth of the Jamaican economy. I was among five other individuals asked to comment. The others are well known economists and academics with broad experiences in Jamaican and Caribbean economic issues.
The Question and Answers were published under the heading: “Can Anything Derail Jamaica’s Surging Economy?”
The Inter-American Dialogue posed the following questions:
“Jamaica has posted positive economic growth for 16 consecutive quarters, while the island has also seen record low unemployment and a rising stock market. What are the main reasons behind the Caribbean nation’s economic growth, and will the trend continue? What economic headwinds might the island see in the near future? How big a role have the policies of Prime Minister Andrew Holness played in the country’s economic growth?”
With a limited number of words with which to answer, my response could not cover all of the possible factors affecting the Jamaican economy or which could derail it. I use this medium to elaborate further.
With an economy highly dependent on the tourist trade, crime and security could prove to be future adverse limiting factors. We’ve learnt from World Bank and UNODC studies, that crime and violence inhibit growth in the Jamaican economy by approximately 5%. This figure could grow in the future. Crime and security could be significantly more impactful should a terrorist act occurs against U.S. citizens or interests in Jamaica or elsewhere in the Caribbean. Such an event would be devastating to Jamaica’s tourism sector, a major pillar of the Jamaican economy.
Another factor which could affect the Jamaican Economy in the future could be the link to the economic future of countries with a high concentration of members of the Jamaican Diaspora whose remittances are responsible for approximately 16% of Jamaica’s GDP. Remittances from the Jamaican Diaspora have consistently averaged in excess of US$2 billion annually over the past decade. Studies have confirmed that Remittances’ economic impact on the Jamaican economy is approximately 24% of GDP annually. A significant downturn in the economies of Diaspora based countries from which most of the remittances originate, in particular the United States, Canada, and the United Kingdom, would adversely affect the level of Remittances from these countries.
It is also important to note that most of the Remittances come from Jamaican Diaspora immigrants who have grown in significant numbers over the past 50+ years in the United States due to family linked migration visas. Immigrants from Jamaica who have benefited primarily from family immigration has averaged almost 20,000 annually. The proposed new immigration reform package forwarded to the U.S. Congress by President Donald Trump, should it become law, would significantly curtail family-linked immigration. Immigration opponents in an effort to disparage the benefits of immigration to U.S. social, economic, and political development have dubbed family-linked immigration as “chain migration”, thus diminishing the family unification aspects of the current system. Significant reduction of immigration from Jamaica would adversely affect the level of Remittances and therefore the future of the Jamaican economy.
Experiences across the Caribbean have shown also that one natural disaster, such as a devastating hurricane, can cause significant losses in these small economies and challenge the economic resilience of these countries.
My limited Answer to the question posed by the Dialogue focused primarily on the continuity of the economic program of the former government:
“The fact that the Jamaican economy has been growing for “16 consecutive quarters”, twice the period of the current administration’s stewardship, is evidence of the importance of continuity of successful policies and programs established under the prior administration. Prime Minister Holness’ administration is now reaping the economic growth benefit by its decision to maintain the structural changes of the Jamaican economy implemented by the previous government, though painful for the Jamaican people at the time.
“The Holness administration inherited a restructured economy which had the blessings of the IMF, World Bank and the Inter-American Development Bank. Continuity increased confidence in domestic investors, and foreign investors which already had targeted Jamaica as a place to invest. Hence, maintaining stability in the Jamaican economy meant continuation of an environment of confidence for foreign direct investments, in particular in the tourism, energy, and bauxite/alumina sectors, and infrastructure development.
“The Jamaican stock market continues to grow on the heels of economic stability, business expansions and consolidations, and the huge profits of listed companies benefiting from a growing and stable economy. However, instability in the Jamaican currency is of growing concerns to the local business sector which needs urgent attention.
“Also, warnings to Jamaica and the region of Chinese so-called “predatory economic practices” by the Trump Administration could have a chilling effect on the Jamaican economy in the future. One should not be overly optimistic that U.S. investors will supplant the Chinese and other foreign investors merely on President Trump’s wishes.”
The Latin America Advisor with the answers of the five commentators may be accessed at:
http://www.thedialogue.org/wp-content/uploads/2019/05/LAA190529.pdf
© 2019 Curtis A. Ward/The Ward Post
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