PRESIDENT OF the Small Business Association of Jamaica (SBAJ), Edward Chin-Mook is predicting that up to one third of jobs could go in the new year as the country continues to face tremendous pressure from the global economic slowdown.

Some businesses have taken steps to cut their operating costs, indicating to Labour Minister Pearnel Charles from as early as last month that jobs would go in the new year. That includes jobs in Jamaica's main export industry, bauxite, where falling demand for aluminium has triggered losses.

"I expect an across-the-board cut of 25-30 per cent of the labour force," Chin-Mook tells The Sunday Gleaner.

However, financial analyst, John Jackson, says it's too early to tell.

"It also depends on the periods, as the first half of next year may well see some losses, while the second half could be different as one starts to see the signs of the coming end of global recession," he opines.

Jackson adds that while tight monetary policies will result in a drag on economic activities during the first quarter of the year, it will encourage lower interest rates. The Jamaican dollar also has been taking a beating from the global slowdown, forcing the central bank to raise cash reserves twice, so far, as the dollar traded $80 to US$1 this month. It also raised interest rates for a fifth time this year in response to the devaluation of the local currency.

"(This is) the fuel that will be needed to keep economic activity from collapsing in 2009 as well to cut government cost of borrowing," he says.

"As soon as people realise that the bottom has not fallen out of the tourism sector the dollar will start settling probably as early as in January and the stage will be set for interest rates to start the inevitable fall," he adds.

Government responded to the global economic crisis with the announcement of a stimulus package to stave off further fallout in the economy, earlier this month.

Stimulus package

The plan, announced by Prime Minister Bruce Golding, is worth billions in tax relief and loans for the manufacturing, small and micro enterprises and tourism sectors.

"The stimulus package presented will not save jobs, it will create new entities or focus existing firms to greater levels of efficiency, innovation and creativity," Chin- Mook says.

He adds, "Jamaica is a small open economy, dominated by small firms employing between five, 10, 15 to 20 employees," he adds. The sector employs a majority of the labour force.

According to Chin-Mook, the procurement adjustments made by government will especially act as a catalyst. The adjustment will give local businesses a 10 per cent margin preference for government contracts.

"(It) will act as a catalyst for firms to adopt horizontal or vertical integration to remain in business or expand," he says.

The SBAJ head says businesses will have to evolve to take advantage of the package, investing more in research and development. He notes that the special programme to retrain redundant workers by the HEART Trust/ NTA will play an important role in reorganising firms.

However, Jackson says while government's stimulus package will have some impact, it's not something on which one should place too much emphasis.

"The economy is not likely to be as badly off as many have been predicting, so I don't think one has to worry too much about the PM's package and its stimulating impact," Jackson advises.

Economist Dennis Morrison is not so optmistic. He thinks Jamaica will have much to suffer if the crisis in the US market continues or gets worse.

According to Morrison, while the stimulus package will provide some ease for the economy, the benefits from the package are outweighed by the pressures associated with the downturn. Tourism, he says, might only be saved by the investment that was made by Spanish investors who have the capacity to attract the visitors to the island to fill the extra 2000 rooms created in the industry.

Morrison adds that the upcoming year will be tough and one should not expect any economic growth.

"I wouldn't predict any growth. I can't think of a year that will be as tough in recent times," Morrison comments.

gareth.manning@gleanerjm.com