By Halshane Burke
The Economic Programme Oversight Committee (EPOC) is cautiously optimistic about Jamaica's economic development.
Speaking at EPOC's quarterly press briefing Friday morning, Committee Chair Keith Duncan said the economy will continue to face headwinds on the international front.
The International Monetary Fund has predicted a slowing of global economic growth influenced by the Russia-Ukraine war, coupled with continued geopolitical tension. This, the IMF, says could see disruptions in the supply chain.
Mr. Duncan said if the global economy slows dramatically, Jamaica's tourism arrivals and earnings could be affected due to a slowdown in source markets. This would also negatively affect tax revenues and fiscal performance.
But despite the potential risks, the EPOC chair remains hopeful about the country's economic fortunes and that growth will continue to hit medium term targets.
"Based on the trend of reducing inflation and the continued reduction in oil prices, we are hopeful that inflation can continue to recede or be reduced at a faster rate than even what the BOJ projected, to get to into the range of four to six per cent by December 2023."
"If we can get there faster, that would mean the Bank of Jamaica can move fast in terms of loosening monetary policy, possibly looking to reduce the interest rate," he added.
While there have been recent failures in the US banking system, Mr. Duncan said Jamaica's financial system remains stable and strong despite the hikes in interest rates and tight monetary policy.
He has predicted continued reduction in the debt burden.
"This will ensure that we continue to increase fiscal space that will allow for the release of buffers and the increase in investments in infrastructure, the ability to pay our public sector greater levels of compensation and improve delivery of service to our taxpaying Jamaican citizens by the Government of Jamaica and our civil servants and public servants."
According to Mr. Duncan, increasing productivity will be key to improving the wage to gross domestic product (GDP) ratio.
The increase in the wage bill for public sector workers, under the compensation review exercise, will push the wage to GDP ratio to 11 per cent of GDP, which is above the prescribed level.
Mr. Duncan said a more productive public sector will translate into an increase in the GDP.
Mr. Duncan added that a decision needs to be taken to determine the way forward concerning the wage to GDP rule in light of the increased ratio.
"We recommend that the wages and salaries as a percentage of GDP rule be reviewed, bearing in mind the current reality or the breaches accepted for the specific time frame until this ratio can be brought within the 9 per cent fiscal rule or we revise this number," he suggested.
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