On September 4, 2013, in Saint Lucia, the incoming chairman of the ECCB Monetary Council Hon. Dr Kenny D. Anthony, prime minister and minister for finance said, “Growth in the Currency Union is expected to be marginal at 1.5 percent in 2013 and 2.2 per cent in 2014.”
In regards to “An Agenda For Growth” this is what he had to say, “We are conscious of the need to stimulate growth as this is linked to the achievement of financial stability, fiscal and debt sustainability and ultimately, sustainable employment for our citizens. In this environment, we must pursue efforts to return our economies on a path of growth by carefully selected investment initiatives.”
He continued: “The Monetary Council has approved a three-pronged approach to growth and development consisting of:
1. Focused Stimulus and Safety Net Programmes geared towards providing employment for communities;
2. The identification of a lead transformational sector with the capacity to put the economy on a path to sustained growth and development; and,
3. A cluster of major infrastructural and related projects at the national and regional levels to lay the foundation for broad based, diversified and internationally competitive economies.
The projects will be in the areas of: (a) Transportation (b) Energy (c) Environment (d) Education and Skills Training (e) Research and Development (f) Information Technology (g) Governance.”
Upon reading the above, other indicators that came across my news portal had to be revisited.
In the July edition of Insight and Publications, the article entitled “Game changers: Five opportunities for US growth and renewal”, stated the following: “New McKinsey research pinpoints five catalysts – in energy, trade, technology, infrastructure, and talent development – that can quickly create jobs and deliver a substantial boost to GPD by 2020.”
More germane, the Bank of Canada in its July outlook is forecasting measured progress in the Canadian economy to 1.8% in 2013 and 2.8% in 2014 and 2015. Meanwhile, the US economy is up 2.5% from 2.2%, with an outlook for the remainder of 2013 expected at approximately 2.5%.
Coming out of the recent International Monetary Fund (IMF) seminar on Caribbean economic growth in The Bahamas, the Jamaica Observer, in its editorial of Tuesday September 24, 2013, entitled “Where Dr Kenny Anthony went wrong” took to task his comment “One of the challenges we face is to explain to the international community the peculiar circumstances of our region.”
The editorial continued: “We beg to differ. As we have argued before in this space, the problem for CARICOM is that the international community, including the multilateral financial institutions and the traditional developed country partners such as the USA, UK, EU and Canada, are not convinced that our governments are doing enough to help ourselves to achieve sustainable economic development.
“What would give the impression of a sense of purpose would be fiscal management consolidation, less external borrowing, completing the CARICOM Single Market and Economy, and allowing exchange rate adjustment.”
The International Monetary Fund on Tuesday, October 1, 2013, now says the “impulse to global growth “once again rests with the United States, while the larger developing countries face potentially permanent limits on expansion. The fund reduced its forecast for global economic growth this year to 2.9 percent, from the 3.2 percent it predicted six months ago, and said the world seemed stuck in ‘low gear.” The world GDP forecast for 2014 is 3.6% according to the latest estimates from the IMF.
At the regional finance ministers (from throughout the Americas and the Caribbean) meeting in Washington, DC, Wednesday October 2, 2013 to discuss economic outlook, challenges and ways to boost growth, The Inter-American Development Bank (IDB), President Luis Alberto Moreno, called on governments to work closely with the private sector through public-private partnerships and other means, to overcome the region’s infrastructure bottlenecks that have been a drag on growth. And to discuss ways to boost productivity and reduce informality in the region’s economies, and to create strong engines of growth at home, which will help reduce inequality.
Historically, investment has usually followed US growth; and where specialized knowledge, innovation, and technical expertise remains attractive for future growth in leading economies, where investment capital remains fluid.
By design, these key elements will have to be present if “Growth in the Currency Union is expected to be marginal”, at best; and particularly, in Saint Lucia the leading economy in the OECS. The rational is, whether world events in markets such as the BRIC nations and now with the ongoing shutdown in Washington, DC, is a sign of unending limitations.
To date, the situation within the region is far from favourable. Actually, the economic base is shrinking rapidly. OECS member states continue to struggle to meet recurrent revenue and are in some stage of negotiation with the IMF to address debt and fiscal sustainability.
In the case of Saint Lucia the finance ministry conceivably has to engage in its own mechanism by default, that is to prioritize payments as cash levels fall. There is no need to guess why VAT refunds have not been made. And by the way don’t forget – You have to ask for it! Yes! You have to ask for it!
Currently, far too many national projects that have regional implication has been delayed or discontinued. Notwithstanding, the setbacks to development enterprise in areas of national security, education and skills development, infrastructure development, agriculture and energy!
These should not be compromised. But when permitted, it tends to convey a fundamental lack of confidence and policy direction that eventually upset market reassurance! (Port Castries and Vieux Fort redevelopment, Hewanorra International Airport, George F.L Charles Airport and surroundings lands, and the Cul De Sac basin come to mind). At the same time one is had press to find an applicable fiscal policy that express any good judgment to push cost down and to correct inflation, the price of land, labor, capital and to cure the deficit.
These delays whether political, bureaucratic, or as a result of project implementation uncertainty needs to be corrected. Including, the lack of exposure to public-private partnership (PPP) projects — and the need to improve foreign currency reserves, reduce the debt burden and high rates of joblessness, and attain security stability.
Rather than sucking out liquidity in the marketplace, it is time to decide on a policy framework that can stimulate these stalled investments, create jobs, and grow the economy.
These require an acute sense of urgency. First, to initiate analysis with broad civic engagement, business and industry investment capital, with the right mix of political security; and, second, fiscal policy to target specific financial instruments of multilateral development and investment banks; and, to make better use of Diaspora bonds, for education and infrastructural development.
Including access to the European Union grant of one billion Euro that is currently available for crime and security, regional integration and cooperation, and climate change for the Caribbean.
Indeed, I am obligated to reference my previous publication on January 16, 2013, entitled Ken-e-economics, a failed gimmick!, ”Clearly lacking is Ken-e-economics in-depth analysis of the economic situation at hand, the management, and knowledge factors, including the political vultures of narrow ideological politics, that lack the capability to identify investments, create jobs, attend to bi-lateral trade and solve problems.”
The simple truth is that self-inflected wounds and Ken-e-economics will not create economic growth and maintain economic vitality in Saint Lucia and the region!
Growth is falling to record lows. Currently, little to any direction to growth-positive actions and to unlock liquidity is forthcoming.
However, for growth to take place inflation will have to come down. But the key element here is to stabilize interest rates and push down inflation. That means putting people to work through gainful, sustainable employment within a high-skill based value chain that is supported by an education system of skill development to encourage investment. The VAT system requires enhancement. A revision of the input cost burden on exports would help, as well as on raw materials and capital goods.
With the level of need in the region, there is also too much uncertainty around the key things that must be done, such as policy formulation, exploring financing, investment capital and risk management. All of which is an art form of precise formulation.
Besides that, the level of economic activity in the region and globally is now delayed – specifically, exports and business investment with the recent US shutdown.
The Bank of Canada, now under the leadership of Stephen Poloz, on October 23, 2013, issued a revised forecast for Canada’s economic growth at 1.6% this year, down from the bank’s July outlook of 1.8%. And a 3% drop from 2.8% to 2.5% for 2014.
Importantly, the projected growth forecast for Saint Lucia of 0.9% is now 0.2% for 2013 and 1.3% in 2014.
And for that reason, less political brinkmanship is desired to achieve a sustainable fiscal path in a balanced and thoughtful way.
Melanius Alphonse is a management and development consultant. He is an advocate for community development, social justice, economic freedom and equality; the Lucian People’s Movement (LPM) www.lpmstlucia.com critic on youth initiative, infrastructure, economic and business development. He can be reached at email@example.com“>firstname.lastname@example.org