PIOJ Growth-Inducement Strategy - Planning Institute of Jamaica

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consolidation confirms this pro-cyclical tendency, which is further aggravated by the nature of the political cycle. There are current signs that these risks are real, for example, in the underperformance of certain categories of fiscal revenues (April – December 2010), in particular, PAYE and GCT (local) tax collections. 6.0 Policies to Address the Risks to Economic Growth The need to reduce the economy-wide risks to the sustainability of the current fiscal consolidation strategy and to achieving a higher growth target, therefore, compels an urgent re-consideration of the medium-term macroeconomic policy agenda to focus on initiatives that achieve the following objectives: • provide a stimulus to aggregate demand, in the short-term • enhance the resilience of the economy to shocks • reduce or remove, over the medium-term, critical structural constraints to longterm growth • improve the social inclusiveness of economic policies, which would include arresting and reversing the upward trend in poverty and addressing urban-rural imbalances. Table 5.13. Selected Natural Disasters & Their Estimated Economic Impact Event Year Intensity Cost ($J Billion) Impact (% GDP) Hurricane Michelle 2001 Category 4 2.52 0.80 May/June Flood Rains 2002 - 2.47 0.20 Hurricane Charley 2004 Category 4 0.44 0.02 Hurricane Ivan 2004 Category 3 36.90 8.00 Hurricanes Dennis & Emily 2005 Category 4 5. 98 1.20 Hurricane Wilma 2005 Category 5 3.60 0.70 Hurricane Dean 2007 Category 4 23.80 3.40 Tropical Storm Gustav 2008 - 15.24 2.00 Tropical Storm Nicole 2010 - 20.50p 1.90 Total 113.77 p = preliminary Source: Compiled by PIOJ Of special note regarding the fragility of our growth projections, Table 5.13 highlights that during the last decade, Jamaica has suffered from several natural disasters, with Hurricane Ivan being the most significant. Combined, these disasters have cost the country approximately $114 billion or approximately 2.1 per cent of GDP annually (compare this to the optimistic baseline forecast of 2.1% real GDP growth for FY 79
2011/12). These extreme weather events have also contributed significantly to either undesirable budget imbalances or unplanned (and oftentimes, unproductive) cuts in expenditures to finance post-disaster rehabilitation. In light of these imperatives, the PIOJ is proposing adoption of a Growth-Inducement Strategy focused on a mix of short and medium–term measures featuring: • Targeted infrastructure spending, which is intended to improve the resilience of the built environment, contribute to increased agricultural production especially through rebuilding and maintaining farm roads, generate an immediate injection of aggregate demand and income, and improve social inclusion in volatile and vulnerable communities. • A targeted and broad-based Community Renewal Programme, aimed at ameliorating crime and improving social cohesion in targeted communities. • A package of medium-term policy reforms, including tax reform, which address the removal of structural constraints and improving cost-competitiveness of the economy. • A strengthening of value chain linkages between tourism, agriculture, agroprocessing, and local services. Early adoption and implementation of this Growth Inducement Strategy is projected to provide significant immediate benefits beginning in 2011 in terms of the following key objectives: a. job creation b. GDP growth c. poverty reduction. In addition, these initiatives offer a new opportunity to unlock latent wealth tied up in potentially productive assets (financial assets, physical capital, land, and labour) that now lie idle and, thereby, to create a strong platform for sustaining the momentum of growth in the medium and longer term. Based on an analysis of economic impact, primarily using the PIOJ’s Input-Output model, a package of short-term measures which target an acceleration of public works and community renewal projects is projected to yield the following benefits: Increased economic growth, employment and tax revenues: relative to a baseline projection of 2.1% for 2011, accelerated short-term measures could yield an additional 1.6 percentage points (or $19.1 billion) to 3.1 percentage points (or $37.6 billion) of real GDP growth. Higher GDP growth could result in an additional 3,075 - 3,142 jobs, and generate an additional $4.5 billion - $8.9 billion in tax revenues. These revenues would represent a net inflow to the treasury, since the PIOJ proposals calls for the utilization of resources that have already 80
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i A GROWTH-INDUCEMENT STRATEGY FOR
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To the many ordinary Jamaicans who
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Preface The Jamaican economy has ex
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for making a determined start on th
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the private sector groups, listed b
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Citibank N.A. Jamaica Branch Grace
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need for “additional fiscal space
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Chapter 2 ________________ Summary
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1.0 The Economic Situation Today 1.
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expected to provide an essential an
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Table 2.1. The Policy Framework: A
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programme of social inclusion that
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Strategic Focus Table 2.2. Growth S
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6.0 Short-Term Growth Stimulus 6.1
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decline of 2.0 - 2.2 percentage poi
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Table 2A.2. NWA Projects To be Fast
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Table 2A.5. Community Renewal Proje
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Table 2B.3. Impact of Repairing Far
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Appendix 2C Methodology of the Grow
Page 39 and 40: Part I _________ Overview 28
Page 41 and 42: 2.0 Vision 2030 Jamaica Before delv
Page 43 and 44: 3.0 May 2010 Security Event and Aft
Page 45 and 46: the longer than anticipated global
Page 47 and 48: April July October January April Ju
Page 49 and 50: Three industries recorded increases
Page 51 and 52: 9.0 Proposals for Growth-Stimulus I
Page 53 and 54: targeted economic and social infras
Page 55 and 56: partnering with government to disco
Page 57 and 58: 3.0 Growth Inducement Strategy The
Page 59 and 60: Growth-Inducement Strategy Alignmen
Page 61 and 62: 50 Part II _________ Situational An
Page 63 and 64: inadequate provision of public infr
Page 65 and 66: 2.0 Macroeconomic Assessment 2.1 In
Page 67 and 68: Increased global oil consumption wa
Page 69 and 70: $4,742.0 million and $688.4 million
Page 71 and 72: Non -Traditional Domestic Exports E
Page 73 and 74: negative impact of the Jamaica Debt
Page 75 and 76: ethanol and paint, whereas lower de
Page 77 and 78: Analysis of preliminary GCT data re
Page 79 and 80: The number of ship calls to the isl
Page 81 and 82: industry was, however, estimated to
Page 83 and 84: 4.0 Projected Performance 4.1 Calen
Page 85 and 86: increased marketing and extension s
Page 87 and 88: Electricity & Water For FY 2010/11,
Page 89: J$ Million Figure 5.1. Private Sect
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Page 95 and 96: creates allocative inefficiencies,
Page 97 and 98: Million $ Per cent Jun-10 Mar-10 De
Page 99 and 100: Table 6.1. Employed Labour Force by
Page 101 and 102: J$ million Mar-10 Dec-09 Sep-09 Jun
Page 103 and 104: FIGURE 7: GROSS NATIONAL SAVINGS RA
Page 105 and 106: 4.10.2. However, the extent of the
Page 107 and 108: Part III ____________ Analytical Fr
Page 109 and 110: functional relationship between the
Page 111 and 112: It follows that: (5) s = I/Y = [S -
Page 113 and 114: However, the existence of measureme
Page 115 and 116: (d) v* = Y*/K* This is a measure of
Page 117 and 118: in Chapter 8. The mutual interactio
Page 119 and 120: Transforming the complex set of str
Page 121 and 122: Appendix 7A A Methodological Note T
Page 123 and 124: Chapter 8 ____________________ Asse
Page 125 and 126: The DBI focuses more narrowly on qu
Page 127 and 128: to ask, is it possible to predict g
Page 129 and 130: can be made to serve a very useful
Page 131 and 132: For further elaboration of the cons
Page 133 and 134: progressive Jamaica-based firms and
Page 135 and 136: Table 8.2. Jamaica: Doing Business,
Page 137 and 138: Table 8.4. Global Competitiveness I
Page 139 and 140: Table 8.5 (continued) Rank Indicato
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Rank* Constraint Table 8.7 Business
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Chapter 9 ___________________ Inter
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3.0 The Burdens of LAC’s Logistic
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conditions. These combined with a p
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Figure 9.4. Proportion of Primary A
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6.0 Logistics are Essential for Tou
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7.0 Fundamental Steps Forward for J
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Part IV ________________ Policies a
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Current Status: Cabinet by decision
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e more than compensated for by the
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B ____________________ Eliminating
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Commercial Bank loan rates have als
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5.0 Expected Outcomes These measure
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capital, mainly in the form of equi
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oth local and overseas (including t
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Table C.1. Proposed Implementation
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Locally, the Scientific Research Co
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Develop formal and informal links t
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D ____________________ Business Pro
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5.0 Recommendations Based on the ma
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2.5 Coexistent with the levels of u
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industry as well as provide funding
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Table E.2. Unemployed Labour Force
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indirect losses experienced when th
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Table F.1 (continued) Area Type of
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G ____________________ Community Re
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Figure G.1 Community Renewal Progra
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Table G.1 Priority Initiatives Obje
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Table G.2 Phased Implementation Pla
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H ____________________ Proposed Wes
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3.0 Transparency Guarantees By desi
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and Coordinating Unit (PCMU) was es
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therefore need to have sanctioned o
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Figure I.1. Functions of National P
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The rationalisation was guided by t
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deliver services in an efficient an
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efurbishing to allow for accommodat
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Part V _______________ Panelists’
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With the benefit of hindsight, some
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ight. Where we as a society fail is
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and exclusion of the majority of th
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the elders, youth, children. What f
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C __________________ Enhancing Nati
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Figure C.1. National resilience is
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