Economist Claremont Kirton, who was a guest Sunday on Radio Jamaica's news review show, That's a Rap, spoke with host Earl Moxam about the global and local economic impact of the coronavirus panedmic.
The excerpt below sets out the main issues discussed, including options for accessing multi-lateral funding and pursuing new business opportunities.
EARL MOXAM: Let me go back to the broad question of where we are now in terms of the historical comparisons. How bad is the global situation in terms of the economic downturn we are facing?
CLAREMONT KIRTON: Well you’ve had a situation where globalization has been deepened and widened over the last few years, and this has impacted trade, finance, information, all of these integrated into a global market, and it’s no longer a global market involving only the developed countries or emerging markets. Developing countries are now integrated fully into the single global market, and that is where the impact may be felt on poor developing countries more significantly.
EM: In terms of where we stand today versus 2008; and some people are going all the way back to 1929; what do you say?
CK: I say that the key has to be in how we respond because in the earlier periods the impact more or less involved the developed countries in the main, with some spill-over effects for developing countries. Now we’re seeing that developing countries are being impacted in a very serious way and have to be able to capably respond to the crisis.
EM: In terms of how we respond now to the crisis; given the fact that things are almost at a standstill; in terms of restarting which industries in which countries and what are those that will be of greatest benefit to Jamaica, given the specific number of commodities in which we trade, given the fact that we’re so tourism dependent, given the fact that we are so dependent on remittances, what’s the scenario likely to be in the next few months?
CK: The first economic priority, internationally, has to ensure that the workforce remains employed. Even if the workforce is quarantined forced to stay at home, a priority must be to ensure that these persons are working and are obtaining income. Secondly, I think that government should give financial support to those institutions, both public and private, which are supporting vulnerable groups in the society… and her I’m proposing that both the state and the private sector play a critical role in this exercise. I’m a believer in the role of small and micro enterprises and I’m proposing also that internationally, in both developed and developing countries, these enterprises should be safeguarded against bankruptcy…
I’m also concerned about the financial system and the possibility that non-performing loans – especially loans granted to SMEs – could become problematic and impact the efficiency of the operations of the financial sector… I think there will be increases in national debt as countries seek to provide funding, not only for the health sector, but to ensure that the economy is resurrected from this particular crisis.
EM: The major countries are in a better position obviously than Jamaica to provide the kind of stimulus than is needed…
CK: The IMF chief has already announced that they will have a significant amount of funds to be allocated to member countries who (sic) make the necessary requests. So I think this doesn’t rule out Jamaica requesting from the Fund support under these conditions to assist in facilitating the stimulus package.
EM: It wasn’t long ago that we thought, having exited that arrangement with the IMF, that we were now clear of them for a while. Are you saying that perhaps in the very short term we will have to return to the IMF for support under these peculiar circumstances?
CK: Well, I’m not saying of course that this will be something negative; I’m saying that if we need the Fund, and if the funds are available… I see nothing wrong with us approaching these institutions – the Fund and the (World) Bank for the funds which they’ve agreed to make available to countries which are experiencing economic problems; economic crises... Of course one would have to consider vary carefully what are some of the conditionalities. If these conditionalities are not satisfactory, and if we have alternative sources of international funding, then we have to do comparative analyses.
EM: And in terms of making the Jamaican economy more fit for purpose going forward, what adjustments do you think we can make in the medium term?
CK: First of all, let me identify some new opportunities. Obviously we’re going to have demand for telecommunications, and this is going to be very important. Do we have the capacity to meet the demand or do we need to increase the levels of operations of the telecom companies? There’s the question also of insurance. How are we going to deal with insurance, and how are we going to deal also with manufacturing companies which may have the capacity to produce medical products, like respirators, like face masks and so on? So, what I’m saying is we must turn the setback into an advance; we must in fact focus on new opportunities, one being very importantly also, the question of ecommerce… I was hearing today that a number of the food distribution companies are providing delivery services, and in fact there’s difficulty where you have to go into a restaurant and sit down and the numbers could be restricted, so that there’s employment creation for persons engaged in delivery services.
I want to focus on a very important issue which you’ve raised with me; that is about the fragility of the Jamaican economy and how we deal with overcoming our vulnerabilities, and I want to start by saying the most important approach to this is to take an approach of regional integration.
Let us start with agriculture and the question of food security. Many years ago we prepared a regional strategic plan which identified agriculture as one of the leading sectors across the region. Guyana has a lot of physical land space where you can produce a lot of the commodities which we import; we import five billion dollars’ worth of food! We can in fact deal with import replacement and import displacement… We can substitute some of what we produce; we can in fact displace some of what we import, and we can also focus on exporting some of the no- traditional products to our diaspora market. So for me the priority has to be agriculture in this period. Deal with the question of food insecurity!
Please click on the audio icon above to access the full interview with Professor Kirton.