Shaw Urges Private Sector to Make Use of Economic Stability

KINGSTON — Minister of Finance, Hon. Audley Shaw, says now that economic stability has been secured, the productive sector must increase efforts to grow the economy through investment, enhanced productivity and innovation.

Mr. Shaw, who was addressing the 3rd Financial Services Commission Expo, at the Jamaica Pegasus Hotel, New Kingston on Thursday, September 8, said that with the realization of economic stability, the time was ripe for new investments in the real economy.

“We must give thanks, because our economy is stable. We must give thanks, because inflation for the first six months of this calendar year was two and a half percent,” he stated.

The Minister charged investors that, with the return of economic stability and enhanced investor confidence, to get back to “business fundamentals” and re-focus on production and productivity and investments in the real economy of the country.

He expressed gratitude that, despite the challenges, the economy grew 1.4 percent by the end of the March quarter, and by 1.5 percent at the end of June, noting that these rates were higher than the growth in the United States over the same period.  

Mr. Shaw also pointed to the stability of the exchange rate; record levels of gross international reserves; and the generation of new jobs, averaging up to 15,000 per month for the period December – March, 2011.

He emphasized that the stable environment now emerging, is critical to economic growth and development.

“Interest rates are virtually at record lows. The Central Bank is now recording an interest rate of 6.5 percent, the lowest interest rate recorded in the history of the Bank of Jamaica,” he said.

He observed that the downward trend in interest rates is also reflected in significant reduction in mortgage rates.

“We have seen where mortgage rates are coming down, and I took an initiative in Parliament in April, where I virtually abolished the stamp duty on the transfer of loans,” he pointed out.

He said that this action has helped to generate more competition among commercial banking and mortgage institutions.

“We have seen average reduction in mortgages since that initiative of between 4 and 5 percent….mortgage rates coming from16 percent down to 10 percent,” he declared.

He admitted that challenges remain including issues with the International Monetary Fund’s Standby Agreement, with respect to the settlement of the seven percent public sector wage settlement, which has impacted negatively on the country’s Medium Term Economic Programme.

“So we had to recast our projections within that context, and we have to look at how we are going to accommodate it properly going forward and, importantly, we are now sitting down with public sector workers,” Mr. Shaw said.

“We have to agree on a formula for wage settlements, for it cannot be that you have memoranda and memoranda over the years and that you programme increases, but that those increases have no bearing on the country’s capacity to pay,” he maintained. 

By ALLAN BROOKS, JIS Senior Reporter