SHAW

Notwithstanding calls from some interests for the Government to formulate a rescue plan for the tourism and manufacturing industries, Finance Minister Audley Shaw has sought to calm fears, saying the Jamaican economy is "not in crisis".

In an address to the nation yesterday evening, Shaw insisted that the regulatory systems were strong enough to cushion the impact of worldwide financial turmoil.

"We are not in panic mode. Our regulatory regime continues to be effective and our institutions remain strong," a confident Shaw told Jamaicans during the broadcast.

"The strength and resilience of our people come to the fore at times of greatest challenge. We are committed to the steady, resolute and inclusive leadership that the circumstances demand," he added.

Global shocks

Shaw had earlier said that the meltdown triggered by plunging stock values in the United States in September would be sufficiently isolated to industries that would not send shock waves throughout Jamaican markets.

The Treasury chief's optimism has been blunted, however, by weak fiscal indicators that point to continued fallout in key industries.

Labour Minister Pearnel Charles will meet with trade unionists Tuesday in the wake of allusions by some companies that major spending adjustments, including job cuts, loomed as they grappled to cope with the global economic downturn.

A grim forecast by the Planning Institute of Jamaica last Tuesday suggested that the economy could shrink by 0.5 per cent in 2009.

The outlook for the winter tourism season has been downbeat. And to make things worse, the Jamaican dollar has suffered a value loss ofmore than five per cent in recent weeks.

But the Government has cautioned that the projections are not all doom and gloom. Total bauxite production rose by 4.7 per cent and remittances up to September increased 8.8 per cent over the corresponding period last year.

Shaw acknowledged that while the downturn in the global economy would weaken tourism and remittance inflows, there were opportunities for the island.

Oil, price positives

"The continued fall-off in the price of oil - from US$147 in July to less than US$50 last week - and reduction in prices of other commodities will significantly counteract the impact of a reduction in foreign-currency inflows on our foreign-exchange market and external accounts and could, in fact, result in an improvement in our balance of payments," a hopeful Shaw expressed.

He outlined a prescription for Jamaica's ailing economy, which will see the country re-energising its relationship with multilateral agencies, including the World Bank, the Inter-American Development Bank and bilateral partners such as the European Union.

He said the relationship with these institutions will give the country access to hundreds of millions of dollars in cheaper loans that can be used to replace funds the country hoped to source from capital markets which have closed now their doors on most emerging economies.

So far, he noted, the Government had sourced US$300 million (J$23 billion) from the multilateral development banks and was in the process of receiving an additional $110 million (J$8.5 billion) by early December.

Shaw said the Government was also embarking on a major reform of the budgetary process and public-sector debt that would help the economy achieve high growth.

A monitoring unit comprising the Ministry of Finance and the Public Service, the Planning Institute of Jamaica, the central bank and the Financial Services Commission is to analyse the daily developments in the global market and formulate adequate policies to tackle the impact.

Other policy responses

On November 12, the Ministry of Finance introduced a US dollar-indexed bond to the local financial market. This bond assisted the Government in raising funds to finance the Budget as well as in stabilising the foreign exchange market.

Central bank implemented a two-pronged strategy to improve the overall supply of foreign currency to the market by reducing the incentives and ability of some institutions to hoard foreign-currency liquidity.

Introduction of a special certificate of deposit to local financial institutions. Investors reversed their build-up in foreign-currency positions in order to purchase the instrument.