Jamaica's Economy: Recession, National Debt to GDP (Discussion)

 Article by S. Jeffery

Published 2016. Edited September 5, 2024.

What is a Recession and what does that mean for Jamaica?

So you've been hearing the term recession being used since about 2008, but do you know what it means?

What is a recession?

According to The Economic Times a recession is "... a slowdown or a massive contraction in economic activities. A significant fall in spending generally leads to a recession." It goes on further to say that this economic slow down may last several quarters, leading to the slow down of growth. The impeding of growth leads to a drop in a country's GDP; it may also cause the fall in business profits and lead to unemployment. While the Recession had a pervasive effect, causing many countries worldwide (including ours) to fall to their knees. We had an additional ailment that made us even more susceptible to the harsh effects of the 2008 to 2013 recession. We had and still have debts on our backs.

According to an article written by  the World Bank our country has "accumulated public debt [of around] 140% of GDP..." (another term used in the economic sphere).  

[see http://www.worldbank.org/en/country/jamaica/overview]

Our country has been borrowing ever since we received independence from colonial England. We've borrowed a great deal and now the sh%t has hit the fan! We need to pay back our creditors and unfortunately we borrowed to do this also - IMF.

To really understand our situation I'll have to explain what GDP is about. Gross Domestic Product (GDP) is the value of the good and services produced by a country in a given economic period, usually a financial year. Its more like a measuring stick to judge a country's productivity. The more valuable goods and services a country produces the better the state of the nation's economy.

How is GDP calculated?

Going to Wikipedia for this....

See https://simple.wikipedia.org/wiki/Gross_domestic_product

To find the GDP of a country, one adds up all consumer spending (C), all investment (I), all government spending minus taxes (G), and the value of exports minus imports (X – M). This is shown by the equation:

^{To have debt is never a good thing that's why the IMF has told the government to reduce its 
debt to about 98% of our GDP giving our country a better chance of growing and providing meaningful 
employment for our people. According to Trading Economics website the Jamaica's  Government debt to GDP had fallen to} 

86.20% in 2022. It has been projected that if the Government plays it's cards right, the country's debt could 

be reduced to 53% by 2029. 

This is predicted by the Statista website which says:

The ratio of national debt to gross domestic product (GDP) in Jamaica was forecast to continuously decrease between 2024 and 2029 by in total 13.6 percentage points. After the ninth consecutive decreasing year, the ratio is estimated to reach 53.93 percent and therefore a new minimum in 2029.

So yes GDP is measurable. If you feel a bit overwhelmed with this information, it's okay. This isn't something that's taught in schools, so it's perfectly understandable if you feel lost.  The major thing you should have in mind though, is that for a country to be wealthy it must produce a large amount of goods and services, as Wikipedia puts it: "...a country with a high value of GDP can be called a large economy. The biggest GDP in the world is the United States.^[1] Germany is the largest in Europe,^[2] Nigeria in Africa^[3] and China in Asia.<sup>[4]"


What these countries have in common is that they have:

1. Vibrant industries</sup>

^{Whether its the manufacturing or service sector these countries have constantly pushed the envelope 
creating and innovating new business ideas and new products/services. Almost every year in 
the United States new companies are formed that churn out new innovative ideas. Most of them 
have been recently created by company's involved in technology. The iphone, ipad, tablets, laptops are
recent examples. Consider} all the things we take for granted like airplanes, washing machines, cars, stoves, 
refrigerator. 

These are old inventions but guess where were created? In America! As for the intangibles:
There's Whatsapp, Reddit, Facebook, Youtube; the whole concept of an App was an American idea! 
And new software platforms are being created by teenagers! Maybe it's something 
about the American spirit. I don't know but they create the world's leading products 
9 out of 10 times (my estimate).


^{2. Entrepreneurial mindset.}

<sup>They encourage their people to be builders and thinkers to start new businesses. We know about the first 
world countries let's look at a country that should make us ashamed of ourselves.
Now read this and wonder what we've been doing: 

"Since the commencement of its 24-hour start-to-finish business registration in November, Nigeria’s Corporate Affairs Commission (CAC) has registered a total of 10,723 businesses..." This statement comes from Ventures Africa [venturesafrica.com/nigerias-corporate-commission-registers-over-10000-businesses-in-4-months/]</sup>
This took place in the space 4 months! The article was published April 23, 2016. Many consider Nigeria a third world country, 

but they have been making great strides in the past decades (you know about Nollywood right?), 

they are producing themselves out of poverty. Well you say that's good for them but what about us? Yuh sure yuh want to know?... In  2007 the Jamaica Information Service reported that only 4000 small businesses registered with the Companies Office of Jamaica. I haven't been able to find clear data for recent years but as soon as I find it I'll share it with you. 

3. Experts at export
These countries do import but they also make sure that they have exporting as their agenda. Without earning how can a country really survive? The only other option would be to borrow money from lenders and try to pay them back. Obviously our country hasn't been successful in doing this.

The recession and our bad economic choices made it even more difficult for our country to grow. 
- Sharp devalue of the Jamaican dollar We are in a deeper whole, since it's even more expensive to purchase the things we love, if we were exporting on a grander scale we would earn foreign exchange, namely U.S. dollars, we wouldn't need the IMF in the first place. Our dollar's value would rise not fall - our dollar is pegged to the US dollar. 

- Increased debt due to rapid fall of Jamaican dollar. The fall in value of our dollar also increased the amount of debt we owe. Yuh did know?

When the value of the dollar dropped say from $85 to $100 (yes mi know its more now), it meant that you had to find more of your dollar to match up to the value which it had before it fell, to pay for the same things you would normally purchase. You know what I mean...since the dollar has fallen you have to fork out more money to buy chicken, fish, beef, even salt fish (Lawd have mercy). So it takes more of your money to buy something whose value hasn't really moved. Check this...

2 pounds of chicken is still 2 pounds of chicken. When you go to the shop to buy it, the shopkeeper weighs it on a scale before you to see, and the scale says...2 pounds of chicken meat, right. There was nothing added to the meat that wasn't there before. It's the same chicken! So what changed then? Your purchasing power! The money you hold is not as valuable as it used to be. Not giving away my age, but I remember when I could buy a chunky (emphasis on the chunky, patty full a mostly air now) beef patty for $2.00! Yes Jamaican 2 dolla, the paper note! That was when I was in primary school. By the time I was going to high school a beef patty cost $25 dollars, and at college I remember a chicken patty was for about $45, beef was $35 I think. I entered university in 2000 so mi nuh that old! Flash forward to 2016, $140 fi a beef patty, mi god mi soon cyaa buy it! The lovable Jamaican patty was once known as the poor man's delicacy, but no more, smh.

People, our economy has been in trouble for a long time now. The recession however made it more clearer that we are in trouble! Remember the quote about a recession leading to increase in unemployment. Is true! Many companies unable to face the crunch in the economy due to higher import costs (importing raw materials, goods, etc to resell) had to close down or just lay off workers. No doubt their loan rates like the country's would would have risen significantly. If you're feeling the pinch of the recession and the IMF don't worry mi a feel it too, lol. We just have to get creative! Its not hard we need to place value on the things that belong to us and use it strategically to get what we want. In a  previous article I mentioned our unique cuisine. I sincerely believe we need to be more entrepreneurial and also be wise about the alliances we get involved with. Is not everybody bearing gifts is our friend. If only our government would realize this! 

Thanks as always for reading. Share if you wish. Like and comment. ^_^