Crisis team in place

Published: Friday October 10, 2008

Giving the clearest indication yet that Jamaica is facing fallouts from the financial crisis that has gone global, the Government is putting together a top-level team to monitor the domestic financial system, and take action as needed to steady the markets here.

"There is a lot of work being done in terms of managing the crisis in Jamaica," said Don Wehby, minister without portfolio in the Ministry of Finance and the Public Service.

"We had a long meeting on Monday with all the stakeholders to determine how we are going to approach this crisis," he said, "because it is a crisis that calls for leadership."

Prime Minister Bruce Golding, in a speech prepared for delivery to manufacturers last night, confirmed the formation of the multi-agency task force, even as he acknowledged that the economy was in real danger of decline.

The team, "has been set up to monitor and analyse on a day-to-day basis developments in the global financial market to determine the likely impact on Jamaica and to allow for timely and proactive policy intervention," Golding was scheduled to tell members of the Jamaica Manufacturers Association.

Wehby also said candidly that the country had no precise reading on the end result of the fallout, and that Government's response had to be built around mitigation.

"The truth is no one knows what is going to happen," he said at a forum on the economy organised by brokerage Pan Caribbean Financial Services.

"What we need to do is to monitor, analyse and be proactive in terms of what action we can take in terms of mitigating any impact on the Jamaican economy."

Smarter monitoring

Dr Carl Ross of Oppenheimer, who was also a presenter at the forum, argued along similar lines, saying that Jamaica did not need more onerous regulations, just smarter monitoring.

He said global economic conditions were likely to continue sliding into year 2010, creating challenges for the economy.

On Wednesday, the International Monetary Fund, in a revised economic outlook, also said world GDP would fall this year as well as the next, projecting that growth could slow to 3.0 per cent in 2009, cited in the past as danger level for a world recession. (See story on Page 22.)

"Jamaica's ability to raise money on the international capital market is now nil," said Ross, agreeing with the minister who said that access to the international capital market now is near to impossible.

For the current fiscal year, total external funding requirement for the budget is US$600 million of which the Government has already raised US$350 million.

Jamaica's new crisis team will be an extension of the senior economics team that meets weekly on Tuesdays, a day after Cabinet meetings.

That group is chaired by Finance Minister Audley Shaw, and includes Wehby, central bank governor Derick Latibeaudiere, the financial secretary in the Finance Ministry - a position recently filled by Sharon Crooks - and head of the Planning Institute of Jamaica Dr Wesley Hughes.

"We are going to step up that committee, expand it to more stakeholders and as such, a monitoring committee which will monitor what is happening in the global economy," said Wehby.

"I will state that we are going to be in fora very rough time and that is the reality, and we need to manage our way out of it."

The Senator did not say who else would be drafted, neither was it clear if private sector groups would be included.

"We have been having frequent talks with the ministry, BOJ, FSC and we stand ready if required," said Anya Schnoor, president of the Jamaica Securities Dealers Association.

Wehby said at the forum he expected moderate inflation for the second half of the fiscal year, and that the ministry still expected to meet its medium term target of balancing the budget by 2010.

New forecast

He gave no new forecast on growth, but said two chief foreign exchange earners, tourism and remittances, would be impacted.

The average size of remittances is US$200 to US$300 per transaction, of which about 80-90 per cent of the dollar is used for basic consumption, said the senator.

Remittance inflows up to March totalled US$457 million and was projected to increase between six and seven per cent for the current fiscal year.

Currently, remittance inflow is running between 10 and 11 per cent above last year, when remittances reached US$1.97 billion.

"From discussion with the industry and others, we are saying that remittances could fall back to the original projections but still be ahead of the previous year," added Ross, an expert on emerging markets: "Remittances and tourism will suffer, and it might be good to put some discount in place to keep people coming."

Tourist inflows originally projected to increase by between 6 and 7 per cent have been revised downwards to between 4 and 5 per cent, said Wehby.

He said Jamaica is on track to meet its fiscal targets and was still working towards a deficit of 4.5 per cent of GDP.


Source:
Sabrina Gordon
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20081010/business/business1.html
sabrina.gordon@gleanerjm.com