Dennise Williams, Staff Reporter
Experts expect to see improvement in tourism this winter. Tourists enjoy white water rafting on the St. James/Hanover border, courtesy of Calichi White Water Rafting recently. - CLAUDINE HOUSEN/STAFF PHOTOGRAPHER
WHAT DOES 2006 hold for the economy in general and the stock market in particular?
First, according to at least one expert, 2005 wasn't really a bad year for the economy if you exclude external events - namely, oil price hikes and bad weather. But it was these events which drove inflation and depressed the stock market.
That said, the three experts Wednesday Business consulted had a cautiously optimistic view of the coming year.
According to Oliver Chen, vice-president for mutual funds at First Global Financial Services, "2006 is going to be tight, but what's new about that?"
He explains, "I think definitely, we have issues facing our economy. There is some relief that worldwide oil prices are stabilising and so inflation is getting in check. My biggest concern is what is driving the economy. The foreign direct investment coming in is what the Government is banking on to stabilise the economy and provide economic growth of three to five per cent. But stabilising the economy is not good enough."
Another analyst said he expects the economy to be flat this year, but expects that the new year is going to show improvement if the Government can control spending.
Which brings us to the 1,000 pound elephant - the public sector memorandum of understanding (MOU).
Vernon James, head of the stockbroking division of Dehring, Bunting & Golding, said, " The MOU ends March 31st and the government will have to satisfy the wage demands of public sector workers which will put pressure on the budget. That is something to be cautious about in 2006."
However, there are some positives that the experts point to.
First there are the tourism trends pointing to a bumper winter season, bringing with it a strong inflow of foreign currency.
And, of course, there is the stock market.
"I expect 2006 to be better than 2005," Mr. James said. "Generally speaking, 2005 was a compensation for 2004, when the market got away from itself. The earnings of the companies had to catch up to the valuations to satisfy investors. That is why the stock market underperformed this year."
The weak performance is expected to continue into this December quarter still, but showing some improvement, Mr. James said. "Going into the latter half of next year, I think things will pick up and the stock market will be buoyant."
With the Caribbean Single Market set to start in January, Mr. James said, "I expect 2006 to be a year which we will see consolidation, mergers and acquisition. The CSM comes on full stream in 2006 and will bring more investments in Jamaica. It will drive mergers as the Caribbean is forced to become competitive on a global scale."
And last, but not least, is the impending People's National Party leadership race.
Mr. Chen said, "Another caution we have in 2006 is the political leadership race. I do think that the general economic policy will remain the same - I think they don't have a choice - so there won't be much economic disruption."
Mr. James adds, "A new prime minister will be elected and there is uncertainty about the economic policies (that will be followed). The reality is that it will not be far from the current policies. We don't expect any wholesale changes."
