Letters & Opinion

UWP Rebound Claim Ludicrous

By Stephen Lester Prescott

Much has been made recently about a so-called rebound in the Saint Lucian economy and how the Chastanet administration is responsible for it. This narrative which is being peddled, seemingly by design in certain media, is aimed at obfuscating the actual on-the-ground situation by interpreting economic statistics narrowly and restrictively. The favourite ruse of course is to glibly quote figures regarding GDP growth.

It should be understood that the “rebounding” is to be viewed within the context of a sharp and unprecedented contraction of 24.4 percent in 2020. The preliminary growth in real terms of 12.2% quoted by the Economic and Social Review, when we have exhibited the most disastrous handling of the allocation of financial resources in the East Caribbean Currency Union, is surely not something to crow about. The uncomfortable fact for the Chastanet Regime that the size of the economy is some 15% smaller than in 2019, even when the 2019 metrics obtained after a period of flat then declining growth, accentuates this.

The Economic and Social Review notes that the rebound has been led mainly by external factors – significantly, by an upturn in the external demand for services and goods which facilitated higher aggregate employment income and consumption (p. 11). The same source reveals that, at the same time private investment remained weak, and support for the growth exhibited was largely by public sector investment in the building of roads, the Hewanorra Redevelopment Project, the desilting of the John Compton Dam and the embarking on of a new St. Jude building. In respect of these public sector projects, it certainly does not help that the actual allocation of resources, financial and otherwise, is mired in allegations of a high incidence of misappropriation which is likely to be the subject of investigation by Special Prosecutor.

It was to be expected that the progressive opening up of the world economy, particularly with regard to the world travel market, would have had some positive impact on a small economy that is tourism dependent. As people in the major travel and tourism markets made good of the vaccination roll-outs and other related measures by their governments, they jumped at the opportunities to exhale which this allowed. The tourism sector would therefore make a cautious comeback which saw stay-over arrivals registering 47% of 2019 levels. This was mostly due to the aggressive stance taken by organisations like the Hotels and Tourism Association. It is instructive to note that, at the same time, the cruise subsector did not fare well, much to the chagrin of small traders involved in vending and the taxi sector. That subsector has actually declined further. A total lack of imagination by a self-proclaimed tourism guru of a prime minister, whose stint as Tourism Minister in the Compton/King administration did not expand the tourism plant by one additional room, can hardly be credited for this recovery. His subsequent stint as prime minister was just as unremarkable.

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Consistent with the Chastanet Government’s befuddled approach to economic interventions during a period of exogenous shock, weak investment in the private sector mirrored misdirected policy that de-emphasized the role of the domestic economy in economic recovery.  Support to the private sector (including income support which was very scant) would have served to cushion the precipitous showing that we had at the height of the pandemic. This would undoubtedly have spurred production of goods and services in the domestic economy while growing demand. This would have been particularly important for agricultural production in the wake of Hurricane Elsa. Sadly, the concessionary funds that were obtained from international lending agencies were not allocated in any significant degree to this.

While almost all of the money was spent on infrastructural projects in which the lion’s share went into lining the coffers of those who were handpicked for untendered contracts ($ 264.2 million) simple actions like making resources available to farmers and small and medium business which would have bolstered the domestic in-country economy, while tourism reeled from the effects of the pandemic, were overlooked. These were ignored despite the matter being raised repeatedly by the SLP as well as by other expert opinion. The argument was made that these projects generated jobs. However, the relatively small number of precarious construction jobs generated can scarcely be justified by the financial outlay. Unemployment is reported, even after some recovery in the tourism and services sector, at some 22% overall and 37% among the workforce below 25.

Of course, public sector spending can be very critical for economic recovery; but where in a global pandemic and the aftermath of an extreme weather event that has devastated agricultural production one allocates very little resources to income support, social relief, the recovery of SME’s, and critically to agricultural production, the seeds of unprecedented economic contraction are being sown.

More significant social safety net interventions, which were largely frowned upon by the Chastanet Government, would have grown consumption and would have had a positive net effect. Together with financial injections in the sectors that we have indicated, these would have had the beneficial effect of reducing the magnitude of the slump of 2020. The idea that such social safety-net interventions are only handouts to mendicants who make little or no contribution to the economy and to social life is erroneous. The elementary observation that income support for individuals who have been the casualties of an economic downturn helps grow consumption in the economy, seems lost on the likes of Mr. Chastanet. His is a mindset that sees the only meaningful economic activity as that dictated by the requirements of external demand. It is an approach that does not give the domestic economy its rightful place in the overall development of our people.

In the context of these cursory observations and the debt increase to 3. 9 billion dollars or 91% of GDP – a fiscal situation which will impact our capacity to make critical investments and social interventions in our economy for a significant period into the future – the claim that the Philip J. Pierre Government has only been able to make the social interventions that it has done so far on the basis of sound economic and fiscal policy by the Chastanet Administration is ludicrous and dishonest.

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