Jamaica's poor growth performance has a number of well-known explanations, but they need to be supplemented for the latter half of the 1990s, by the loss of competitiveness. The negligible (measured) GDP growth in the 1990s is usually attributed to two factors: an adverse external climate and the financial crisis that arose from bank privatization to poorly capitalized investors, and, financial liberalization, unaccompanied by an appropriate regulatory strengthening. The poverty headcount however, was halved between 1992 and 1998, despite negligible measured GDP growth, which can be largely explained by a conjunction of several factors particular to the period: underestimated GDP growth, judging from the growth in consumption of power, and meat and fish, as well as the rapid growth of currency usage; inflation, which hurts the poor disproportionately, fell sharply; the relative price of food declined, owing largely to trade liberalization and the appreciation in the real exchange rate; other factors may have been the rise in real wages, and remittances. But two important poverty-reducing factors are unlikely to continue to operate in the future, which means that further reduction of poverty is likely to depend on achievement of sustained growth. The report questions Jamaica's self-sustaining and job-creating growth restoration, and argues that this requires improving international competitiveness and productivity, while also addressing short-term exigencies. The policy options are grouped into three categories - those necessary to limit the risk of a crisis and its effect, with a likely immediate impact; those likely to have an impact in the short-term; and, those likely to have an impact in the medium and long-term, but on which action is nonetheless needed now. The report suggests a 'bandwagon' approach to reforms, with policy actions needed on several fronts, in order to improve prospects for sustained growth, including measures that help avoid crises, since crises hurt the poor and damage growth prospects. Such an approach could involve: crisis-proofing actions; actions with short-term impact; and, actions with medium-long-term impact. Given that policy choices are likely to be difficult, an approach based on social dialogue and consensus-building is essential to creating ownership for future reforms by all stakeholders, and for maintaining and improving social peace.
