ADDRESS BY PRIME MINISTER HON. BRUCE GOLDING TO MONTEGO BAY CHAMBER OF COMMERCE


I want to use this opportunity to try to advance the discussion on what is happening in the global market and the impact it is having on us in Jamaica.
There are some harsh realities that we must recognize, understand and confront.
The world is facing its most severe economic crisis
The world is facing its most severe economic crisis since the Great Depression more than 80 years ago. Most people, by and large, are aware of this or, to be more accurate, have heard of it. It is on the news virtually every day. Most persons, however, do not fully appreciate the gravity or magnitude of the crisis and how it affects Jamaica.
The first thing we need to recognize is that, unlike other financial crises we have seen over the last few decades, such as the Asian crisis, Scandinavian crisis and the US Savings & Loan crisis of the 1980s and 1990s, this one is not confined to particular sectors, markets or regions. It is worldwide.
Interdependent global financial system
Over the last 30 years, the world has created an interlinked, intertwined and interdependent global financial system. Money circles the globe through interconnected capital markets almost at the speed of light. A housewife who puts her savings in a bank in Bangladesh or Romania or Peru or Jamaica is totally unaware that her money may be invested in a European bond market or on the US stock market or in a sub-prime mortgage portfolio. Because of this interconnectedness, the toxicity that erupted in the United States has spread right across the globe.
Twenty five (25) banks collapsed in the US last year and a further fourteen (14) so far this year, the most recent occurring last Friday. Similar bank failures have occurred in Europe and Asia, the other two dominant regions in the global financial market. The IMF declared last month that bank losses worldwide would exceed $2.2 trillion. Nobody can be absolutely sure because in the current turmoil the value of these assets cannot be determined as it changes so rapidly. Some analysts put the total figure at more than $3 trillion.
It is not just the failed banks that have suffered. Stocks and assets held by financial institutions across the world have lost more than $30 trillion in market value in a matter of a few months. This is not money belonging to corporate conglomerates. This is money which represents the savings, investments and pension funds of millions, indeed billions, of people including ordinary working people throughout the world who are now $31 trillion poorer, many of them completely wiped out. The IMF estimates the total GDP of the world to be $65 trillion. The losses, therefore, represent almost one-half of the world’s yearly output of goods and services.
Consumers are unable or reluctant to spend
In this tempestuous climate, consumers are unable or reluctant to spend. Banks are unable or reluctant to lend. Investors are unable or reluctant to invest. The demand for goods and services is curtailed, factories have to be closed, millions of people are thrown of work. In the US alone, 3.2 million people have lost their jobs since the beginning of last year – 600,000 in last month alone.
The global economy
In 2007, the global economy recorded growth of 5.2%. Last year it was down to 3.4%. In November, the IMF predicted that for 2009, growth in the global economy would slow to 2.2%. Last week, it revised that projection downwards.
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