Economy In DepressionBy Kendea Jones:
Veteran banker Al Jarrett said yesterday that the country is really in a depression rather than in a recession because there has been no positive growth in the country for two consecutive years.
What’s worse, according to Mr. Jarrett is that the country’s may not recover next year.
"A recession is a down swing but it comes back in at 12 months. It started in 2008 and 2011 is headed in that direction. The government has yet to give you what the negative growth is in 2010 and this year is just as bad as last year in terms of the deficits and debts," he said while appearing on the Love97/JCN programme "Jones and Company".
Mr. Jarrett said he has been following financial reports from the government closely and that he is convinced that the deficit is higher than has been reported by the government.
"Based on the government’s numbers as I see them we are looking at 4 per cent GDP. I deal with the facts that come out of the government agencies themselves. The problem is the government has been [misrepresenting] the figures. Last year, they showed the wrong debt structure when they did the budget and this year they showed the wrong GDP. Moody’s Credit Rating just corrected the government the other day. When the agency saw that, it put (government) on notice that the national debt is going to be 64 per cent."
To prove his point Mr. Jarrett said most countries use one formula to calculate their GDP.
"If you have a declining GDP that comes from the existing GDP and it is deducted. If the GDP is increasing it is added. The International Monetary Fund (IMF) says the GDP is 5 per cent, the government says its 4.3 per cent Moody’s says its 4.5 per cent, the Central Bank says its 5 and that’s in 2009," he explained.
"Now in 2010, the figures aren’t even out yet and the government is saying it is 0.5 per cent and Moody’s is saying it is 1 per cent. I am saying it is three per cent based upon on what they are saying," Mr. Jarrett said. "They have not produced a number that was correct in three years because they put the wrong numbers in from the beginning."
Government debt at the end of June 2011 is projected to stand at 49.2 per cent of GDP, up from 47.3 per cent a year earlier, according to officials.
When asked by host Wendall Jones if political affiliation to the Progressive Liberal Party (PLP) had anything to do with his findings, Mr. Jarrett quickly dismissed that assertion.
"It’s sad when Bahamians get to the point when they cannot engage you intellectually. I can’t deal with people who make statements like that because I deal with facts. I can’t respond to that. I am one of the freest Bahamians in this country. I never lied to the Bahamian public in television or radio. If I have to lie on the behalf of a political party then that party does not deserve to be in office," he said.
Mr. Jarrett also said it is clear that the government did not present a budget that was in the best interest of Bahamians.
"I think that the government made a mistake or it was too lazy to produce a budget that was all encompassing and affecting the country and its people. They were concerned about the offset budget to impress the IMF that they were doing something about the mounting debts of $1 billion plus dollars and they were told they had to stop borrowing," Mr. Jarrett said.
"Now they have to offset projects. The government has put itself in a position where the international agencies are now looking at them very closely because they came close to the edge with the over-borrowing and record deficits and debts."
The veteran banker said he believes that international agencies dictate the government’s budget.
"They are following the dictates of the international agencies and the IMF because they are saying to the government that ‘if you don’t stop what you are doing we are going to downgrade you,’" Mr. Jarrett said.
"The agencies are also saying that ‘you are going to be downgraded unless you start putting out realistic budgets that makes sense and can be achievable. You are overstating your revenues and you are increasing your expenditure based on false revenues."
Mr. Jarrett said if he were minister of finance, international financial watchdogs would have no need to make these kinds of statements.
"I would not have gone on a borrowing binge unless I had a real stimulus. I would have made sure that if I produced a budget, on the revenue side it would have been more conservative and more realistic to reflect the times we are in," he said.
"Once you have the experience and the knowledge to understand the financial market and microeconomics you would know these things."
State Minister for Finance Zhivargo Laing was quick to shoot down Mr. Jarrett’s assertion by saying the veteran banker is the one who is mistaken.
"That is just utter nonsense," he said when contacted by the Journal. "The problem with what Al Jarrett says is that he is speaking to GDP over a calendar year from January to December but the fiscal year runs from July to June. So what happens is that you have to do an average of the GDP over two halves of a calendar year to capture what the GDP would be over a fiscal period."
"When he suggest that we did not include the contraction of last year and this year, he has no clue that in a fiscal period you have to calculate over the 12 -month period in the fiscal year."
The minister also expressed confidence that the economy will begin to rebound next year.
"What we are forecasting and what the IMF is forecasting is that there will be some improvement next year over this year" Minister Laing said.
The government’s $1.8 billion came into effect on July 1.
The budget allocates some $1.55 billion for recurrent expenditure and more than $265 million for capital expenditure.
The government is however determined to tighten the rein on revenue collection.
Getting its fiscal house in order has also forced the government to roll out tough cuts to public spending and a raft of tax increases.
Immediately after doing so, the Opposition slammed the new fiscal plan as a "tax and pain budget" that would only put more pressure on the backs of Bahamians.
But Minister Laing insists that the government is doing what it can to cut the deficit.
"It is in the interest for the people of the Commonwealth of The Bahamas and generations of Bahamians to be able to have our deficit reduced and borrowing reduced because it helps us to position ourselves in the event that something else should happen in the future," he said. "Al Jarrett’s comments are often laced with his own political agenda."
July 26th, 2010
jonesbahamas
