PIOJ Growth-Inducement Strategy - Planning Institute of Jamaica

shrinking fiscal space due largely to unprogrammed expenditure as a result of
unplanned events such as the May 2010 Security Operations in West Kingston 31 .
(The smaller fiscal space restricts the ability of government to engage in growth
inducing programmes.)
loss of wealth associated with unregulated Financial Organisations (OLINT, Cash
Plus).
3.4 The situation is further compounded by Jamaica’s economic structural
deficiencies, which have slowed the pace of recovery efforts. Structural deficiencies
identified in the Jamaican economy include:
1. High Debt to GDP ratio: This condition has the effect of:
a. preventing the Government of Jamaica (GOJ) from running
countercyclical policy to stimulate the economy during the recession
b. reducing the GOJ discretionary expenditure (non-debt expenditure), which
limits the government’s ability to spend on growth enhancing areas
(education, infrastructure, security, etc)
c. putting pressure on the supply of loanable funds, which crowds out private
investment.
2. Concentrated Export Base: The Jamaican economy’s export base is highly
concentrated, heavily dependent on the export of Bauxite & Alumina and
Tourism. This has led to the Jamaican economy being highly susceptible to
shocks.
3. Inadequate Labour quality: The quality of the Jamaican labour force 32 has also
negatively affected Jamaica’s ability to reallocate workers to areas that are more
economically viable, thus constraining the country’s ability to recover from the
recession and move into higher productivity activities requiring skilled labour. In
the 2010-11Global Competitiveness Report, Jamaica ranked 80 out of 139 in the
category Higher Education & Training. Additionally, the country’s inadequately
educated workforce was ranked as the fourth most problematic factor for doing
business.
4. Mobility of Capital: The financial sector meltdown in the mid 1990s and the
subsequent reform of financial regulations, together with the GOJ’s large appetite
for debt financing, has led to a financial sector that is heavily dependent on
government securities and is relatively risk averse when lending to the private
sector 33 . The current recession environment (11 consecutive quarterly declines in
GDP) has also led to: (i) increase in the stock of bad debts, resulting in
31 ECLAC estimates - $13 billion, while the Ministry of Industry and Investment estimates the fallout at
$18 billion.
32 Approximately 67.7% of the employed labour force did not have “Basic CXC or above” qualifications in
2008.
33 Access to financing was ranked fourth most problematic factor for doing business in Jamaica in the
Global Competitiveness Report.
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