Monday, June 1, 2009

Jamaica's economy playing out as expected

Written by Dennis Chung
Dennis Chung is the author of "Charting Jamaica's Economic and Social Development - A much needed paradigm shift" and a founder of His blog is

When I listened to some of the reactions of surprise to the PIOJ's report January to March 2009 economic performance, I wonder if we are really serious. As far as I am concerned the economy is playing out as expected. Whenever I am asked about the 2.8 per cent downturn in the economy, during that period, as if it is unexpected, I refer to the article I wrote on July 18, 2009 titled "A perfect economic storm". At the time I started saying that "The next six to nine months will be one of, if not the most challenging, in the economic history of independent Jamaica".

For me it was obvious that if things continued the way they did and if leadership did not come together, we would be experiencing all we are today. In fact, it is worse than I expected, as the Lehman collapse made things much worse but the trend I expected is playing out. The extent to which we are feeling it today could have been avoided but too much time was spent in political diatribe and side arguments that distracted us from what we needed to do as a country.

Identifying the fundamental challenge

The consequence of the country not adequately projecting and preparing for the economic downturn has landed us in a situation that I believe will be hard to avoid now. I never expected such a sharp decline in the first quarter, which is going to be better than the second quarter in my estimation. What is happening also is that the economy is already like a runaway car, which is harder to stop once it gets going, and would have been easier to slow down prior to it starting to pick up speed. It is now going to take much more effort, and financial resources, to slow down the decline.

With all of this said, though, it is still possible to lessen the effects on the country, and I had written in my book about the real cause of the problem and gave an example of a five-year plan that could place us on the path to economic development. Some will not take what I say seriously, though, as I am just an accountant trying to talk about economic matters, but I will continue to be comforted by my own voice.

In order to determine how we can deal with the challenges we face, and which are worsening, we must first understand what the underlying problem is. This again I outlined in my book, which in summary is the fact that the country spends more foreign exchange than it earns. Unless this equation is changed we will always be caught in the downward spiral of economic stagnation/decline and debt. If we accept that this is the fundamental problem then it makes no sense addressing symptoms, which we have always been doing. Because of where we are today the measures to address the problem get more and more difficult the longer we wait.