Hopefully, today’s presentation of the Mid-year Budget Review and ensuing debates will take a sharp turn off the path of lingering election bluster and hubris and studiously negotiate the realm of harsh economic reality.
Monday’s Standing Finance Committee offered a preview. And last week’s
convening of the House of Representatives conveyed mixed messages regarding
this requirement to get down to real business in defiance of the afterglow of
the hustings.
For instance, beyond the brittle pillar of a campaign promise there
appeared little data-driven logic to support the move to remove the Revenue
Authority from a changing institutional landscape designed to secure and
enhance the integrity of national revenues.
It’s as if the perils of near fatal decline are somehow being willfully
ignored. There are things, as well, that can be said about the treatment of
troublesome foreign exchange inflows and outflows, including a committed
willingness to disrupt the prevailing regime of access while influencing wider
societal behaviours.
In that context, answering the question of who gets and who doesn’t get
– mere naming and shaming - does not begin to address the real requirements of
wider economic transformation.
Some, not all, of our economists have appropriately broken things down
in bits and pieces to indicate that this goes beyond the dogged application of
Central Bank disclosure principles. There has, however, been some public
timidity in suggesting that the country needs to undertake dramatic behaviour
change to stem net outward flows.
It is a discomfiting scenario to suggest that brand preference in
motorcars and other imports, offline and online purchases of consumer durables
surplus to real need, public entertainment, and overseas travel will have to
inconveniently enter the discussion at some point. The old story of taste
versus need.
For, what is actually before us? Our economic mainstay, the energy
sector is, arguably, in irreversible decline. Our manufacturing sector is
promising and has displayed a level of resilience but badly needs to up its
game. Tourism is also an effectively stagnant proposition at the moment.
Meanwhile, a World Bank dispatch on Monday advised dimly that “flows of
foreign direct investment (FDI) into developing economies - a key propellant of
economic growth and higher living standards - have dwindled to the lowest level
since 2005.”
Importantly, the WB (about which we shall be hearing more in the coming
weeks and months) attributed the decline to rising global trade and investment
barriers. The people engaged in serious business here can tell you how
significantly changes in the geo-political landscape of the global north have
affected prospects for growth and development for us and for the rest of the
world.
In 2023 (note the year), the latest year for which data are available,
“developing economies received just US$435 billion in FDI - the lowest level
since 2005,” the WB report says.
This was two years ago … even before the current steep cuts in
multilateral funding by the US and, increasingly, countries such as the UK and
those of the EU.
Significantly, FDI flows into advanced economies have also “slowed to a
trickle.” Now, consider this alongside the fact that the decline in FDI is
meeting exponential growth in public debt.
Accordingly, in the view of Indermit Gill, the World Bank Group’s Chief
Economist and Senior Vice President, “private investment will now have to power
economic growth, and FDI happens to be one of the most productive forms of
private investment. Yet, in recent years governments have been busy erecting
barriers to investment and trade when they should be deliberately taking them
down.”
Such countries, he said “will have to ditch that bad habit.”
In fact, and in our case, there has been ceaseless lobbying by business
groups and some individuals for the policymakers to pay greater attention to
the state of our current trade and investment environment and to consider
accompanying optimisation of a wider horizon for the generation of wealth.
This space only recently advocated for elevation of the orange economy –
the creative sector – as a key component of the required transformation. The
mid-year review will be incomplete without mention of alternative areas of
potential economic growth.
Additionally, though the rest of the region has been hit hard by the
changing global circumstances – Guyana being the one exception because of
windfall energy revenues – Caricom markets are insufficiently exploited,
despite favourable CSME provisions.
Yes, today’s presentation by the finance minister can be expected to
address the routine issue of supplementary appropriations and make observations
about overall economic performance. But it’s the new administration’s turn to
shine on centre stage. This is more than clever campaign “minifestoes.” This is
where the rubber really hits the road.
