Economy of Haiti - Case Study Example

Economy of Haiti Course Name Professor’s Name Institutional Affiliation City and State Where Institution is Located Date Introduction Haiti is economically ranked 141 in the world using nominal gap as at 2015. The GDP per capita is $1,300 with the GDP growth being 4.3%. The manufacturing and agricultural sectors account for 44% of the country’s GDP. It has a labor force of 4.81% with the service industry having 50.4%, agriculture 38.5% and industries 11.5%. The unemployment rate is 7%. This standard is also supported by the 69% population below the poverty line. The main export good is apparel, manufactures, essential oils, cocoa, and coffee. The main export partner is the USA at 81.5% as at 2015. The main imports are foods, manufactured goods, machinery, and transport equipment and raw materials for their industries. In the recent decade most economies have experienced economic development. Economic development not only refers to the increase in output but also results in improvement of the social and political welfare of people within a country. Thus, improvements in areas such as literacy levels, life expectancy, and poverty rates signal the economic development of a country. Further, economic development is facilitated by a variety of factors apart from economic growth. This development relies on all sectors of the economy namely politics, social status, and historical background to work collectively towards financial success. For instance, when a country is experiencing political instability, domestic and international trade is hindered thus affecting the supply of products within the country. It also affects the revenue collected by the government, increases poverty levels and destabilizes the social well-being of the people. Therefore, the political hindrance directly affects the economic development of the country. Haiti has experienced periods of economic prowess and years of weak economic growth. It is important to note that economic growth relies on the quantities of goods and services a country produces per individual in a given population over a range of years. In contrast, economic development seeks to enhance the financial, social and political well-being of the individual. The economic growth was lowest as at 1983 when the economy reduced to $2.9billion from 3.5% in 1983. The highest increase was from $6.6 billion in 2010 to $8.5billion in 2013 (Index Mundi, 2016). Despite the growth, the economy is still below par compared to other low-income states. [Change in per capita income levels has been experienced in Haiti. The lowest income per capita was in 1992 at $72. The highest level was achieved recently in 2013 when it was $810. The per capita income has maintained its high concentrations in the recent past by averaging $735 from 2007 to 2016. In the duration of 1980 to 1995, the income per capita was low and averaged $265. Year Economic growth ($Billions) Income per capita($) GDP growth rate 1980 3.5 265 7.3 1983 2.9 300 -1.5 1986 3.9 390 0.27 1989 4.2 110 -1.13 1992 3.5 72 -2.25 1995 3.0 365 9.9 1198 4.5 450 2.18 2001 4.7 470 -1.04 2004 5.8 390 -3.5 2007 6.5 620 3.34 2010 6.6 660 -5.5 2013 8.5 810 4.24 The population of Haiti was 10, 485,000 in 2016, the country has a growth rate of 1.71% as at 2016. The Caribbean nation has a life expectancy of 53 and 55 years for men and women respectively. The literacy levels are at 62% in adults and 78% of the population live below $2 per day. The population has grown by almost 100% from 1980 to 2016 with the highest rate being aged 15-64 years. The growth rate of those aged 65+ has maintained at an average of 4.1% with the rate of those below 14 years decreasing from 41.i% in 1980 to 33.4 in 2015. Years Total Population (X 1000) Percentage aged 0 -14 years (%) Percentage aged 15 – 64 years (%) Percentage aged 65+ years (%) 1980 - 1984 5,692 41.1 54.9 4.0 1985 - 1989 6,389 42.2 53.8 4 1990 - 1994 7,110 43.1 52.9 4.0 1995 - 1999 7,838 42.6 53.5 3.9 2000 - 2004 8,578 40.3 55.7 4.0 2005 - 2009 9,261 38.1 57.8 4.2 2010 -2014 9,896 36.2 59.7 4.5 2015 - 2017 10,485 33.4 62.5 4.1 The economic development performance is attributed to several factors that affect the country directly or indirectly. A combination of these factors has slackened the economic development of Haiti. Even though various efforts have been put in place to try to restructure this economy, their effectiveness is hindered by a range of factors. These factors mainly inhibit employment thus causing the growing poverty levels. As the classical theory states, the economy moves towards full equilibrium at full capacity and full employment. In this instance, the demand will adjust to full potential GDP. In this case, for Haiti to attain growth, it should create an environment where jobs are set up in all sectors. The agricultural sector controls 28% of the GDP. It has also employed 66% of the labor force. This ratio indicates the lack of productivity and efficiency of the segment. This lack of productivity restricts a positive economic growth. Further, the agricultural sector is mainly based on subsistence farming and sugar cane which is the primary product. However, the financial input of sugarcane is limited to weather patterns and season success. This limitation adds to the decline of productivity due to the shrinking markets, barriers to trade and the emergence of artificial sugarcane substitutes (Haughton, 2014). Also, the high import rate of products from USA and Dominican Republic has made local products inferior as they lack modern technology input in production. The manufacturing sector in Haiti has a role to play based on the performance of the economy since 1980. In emerging, developed and advanced economies, the manufacturing industry plays a huge role in economic development and growth. Advanced economies such as Germany have strengthened their manufacturing sector through policies and reforms to become export-oriented. Thus, the sector creates employment and earns the country income through export revenue. However, the manufacturing sector in Haiti is not growing. Even though it provides employment for 9% of the labor force and contributes 20% to the GDP. Its products are not able to compete well in the global market as the lack technological input. The sector has not showcased growth compared to the adjacent Dominican Republic which has experienced three-fold industrial increases (Anup, 2010). This lack of growth makes the sector unreliable thus limiting the performance of the economy. It has also failed to improve the internal welfare of Haitians as the income in the industry is low. The other critical area is food and imports. In the recent past, the agricultural sector has failed to produce enough food to feed the country thus necessitating importation of food. When a country is importing food to feed its population, there is a high risk of price fluctuations hence an increase in poverty rates. The way of life also deteriorates thus negative economic development. This dependency on imports especially food limits the extensive evolution of the economy. Mostly, this has affected the economic performance of Haiti since 1980. Infrastructure has played a significant role in the economic development of emerging countries such as China, Japan, and Singapore. These economies have placed their faith on infrastructure to drive economic development. An in-depth analysis shows this is a fact as these economies have had robust economic growth and development in the recent past. However in Haiti, only 5% of roads are considered good, only 7.9% of the populations living in rural and 28% in urban areas have access to safe water. The electricity usage is 36kwh per year compared to 457kwh used in sub-Saharan Africa. These numbers pins point a much-undeveloped infrastructure system. The support system drives trade, attracts foreign investors and stimulates economic development. When it fails, the level of human and economic development is adversely affected. The table below illustrates further. Latin America and Caribbean Sub Saharan Africa Haiti Electricity power consumption 1,503 457 36 Improved water source (% population with access) 89 58 67 Improved sanitation facilities (%population with access) 74 36 34 Fixed and mobile phone subscribers per 1000 people 497 84 64 Internet users (per 1000 people) 115 20 59 The level of education in Haiti is very low. In 1994 only 40% of population aged 15-19 had completed 3rd grade compared to 56% of the same age gap in 2001. Even though the number is growing the quality of education is a key determinant. The productivity of Haiti industries and the agricultural sector is tied down to the skilled labor induced into the system. When the illiteracy levels are high the number of skilled labor is low, in turn, there is low productivity. In the recent past, 92% of Haiti education is controlled by private entities and NGOs this can help the system despite the fact that the entire system needs new policies and reforms that will restructure its system (Diaz, Trapp & Feldman, 2008). The lack of productivity and efficiency in the system has undermined the performance of Haitian economy. Political instability is a norm in Haiti, the country that attained independence in 1804 has failed to have a credible democratic political system up to 2003 (Anup, 2010). This failure has caused political instability that has made foreign investors to shy away from the country. The country is ranked 4th most corrupt in the world. This directly hinders the efficiency of the economy in all sectors. This level of corruption has also taken a toll on the rate of development of the country by crippling trade activities, tax collection and development fund utilization (Erich, 2014). Despite the substantial foreign aid, research indicates some governments during the editorship period used the funds for personal gain rather than national development (Erich, 2014). This affected the performance of the region during the period. Healthcare is also a sector that is directly related to economic development of a country as it affects the social wellbeing of individuals. In Haiti, only 60% of the population has access to healthcare services. Further, outside the Capital, the surgical bed to person ratio is 1:1000. This data shows a huge lack of facilities which adds to the poor sanitation and hygiene in the sector and lack of enough labor to serve the country. The poverty level also affects the number of people who can afford health services. The poverty levels in 1986-87 were 59%, 1999-2000 they were 48%, and 2011-2012 were 69% (World Bank, 2015). These drastic changes illustrate negative economic performance. This shows that a limited number of the population can access healthcare. This limits economic developments as it leads to a 28 in 1000 IMR rate and 17.2 child malnutrition rates. These are indicators that indicate that lack of proper healthcare has lead to negative economic development. Analysis of the economy shows a -0.37 growth rate compared to 4.1% showcased by nearby Dominican Republic from1980 to 2003 (Anup, 2010). The economy lacks capital and labor for investments thus relies on FDI. However, the dependence on FDI is dangerous as it I unpredictable. For instance, the FDI total for 1999 was USD $30million, and the 2002 value was $5 million. The dependence on FDI limits the performance of the economy of the country. It also restricts the capital output of the economy. In 2005, FDI controlled 21% of the GDP, even though it creates employment and income for the country its dependency can be farfetched. FDI can cause economic growth and poverty reduction. This data is illustrated when the economy experienced a growth of 2.5% and 5.5% growth in 2005 and 2012 respectively. Thus, FDI has an effect on the performance the economy of Haiti. Further, analyzing all these factors affecting the economic development, the four components of the Keynesian theory are noticeable. The consumption of the Haiti people is mainly on imported foods. As the argument illustrates, consumer spending is wholly determined by income and changes in income. Thus, the aggregate savings should increase with growth in the GDP. This corresponds to the data on Haiti as in 1992 when the GDP growth rate was -2.3% the income per capita was lowest at $72 while in 2013 the growth rate was 4.2% while the income per capita was at the peak of $810. This data is relevant to the Keynesian consumption function. Conclusion The economy of Haiti has experienced negative growth for a period of 20 years before 2003. This shows that all the sectors are not working efficiently to serve the economy. The government should set up policies that will see the economy regain its stability in the long run. These reforms should aim at long-term benefits by restructuring the taxation system, the manufacturing sector and improving the efficiency of the labor force by improving the education system. All these factors can reduce poverty levels, increase healthcare accessibility and facilities and improve the social well-being of Haitians. This result can be termed as economic development. References Anup, S.2010. Political, Social, Economic and Environmental Issues. A Review of Global Issues That Affect Haiti. Erich, M. 2014. Haiti’s Experiment with Democracy Subverted Once Again, Power and Interest News Report. Haiti: 2015. Towards a New Narrative Systematic Country Diagnostic, Latin America and Caribbean Regions World Bank, Available at http://data.worldbank.org/indicator/SP.POP.1564.TO.ZS [Accessed on 19/05/17] Diaz A, Trapp A & Feldman A, 2008. Haiti Background Report, Economy Plus, vol 22 (1) 23-45 Available at https://www.lehigh.edu/-bm05/courses/Haiti_paper5/ [Accessed on 19/05/17] Index Mundi, 2016. Haiti GDP- real Growth rate, Available at https://www.indexmundi.com/haiti/gdo_real_growth_rate.html [Accessed on 19/05/17] Haughton W, 2014. Trading Economics, Haiti, Available at https://www.tradingeconomics.com/haiti/gdp-growth-annual [Accessed on 19/05/17] Read More