The Bank of Jamaica (BOJ) declared with much confidence that Jamaica’s worsening economic conditions caused by the COVID-19 pandemic pose no immediate disaster for the local economy.

The BOJ made the declaration, as it’s governor and deputy governors fielded questions at the bank’s Quarterly Monetary Policy Press Conference on Wednesday last.

When the question was asked of Governor Richard Byles whether the worsening economic situation poses grave danger for the economy, he responded: “The short answer is no, but I will let deputy governor (Wayne) Robinson answer that question.”

In his short reply Dr Robinson asserted, “I can only echo what the governor says that it doesn’t spell disaster but it just underscores the challenge that we face in this new environment.”

Dr Robinson emphasised that economic players must now refocus and redouble their efforts that Jamaicans can recover strongly from the pandemic, which is expected to hit hard the sectors of transport, storage and communication, electricity and water, construction and hotels and restaurants.

The current projection is that these sectors will experience weaker performances between June 2020 and March 2021. At the briefing Governor Byles disclosed that the BOJ is estimating that the economy will contract by as much as 10 per cent this fiscal year, which is above its earlier forecast for a contraction in the range of 4 – 7 per cent.

He pointed out that “this worsened outlook for the economy is largely associated with the resurgence of the virus in major trading partner countries as well as updated assessments of the impact of the crisis on some sectors of the Jamaican economy.”

IMPENDING UTILITIES TARIFF INCREASES TO AFFECT INFLATION

The BOJ pointed to another area of concern regarding the Jamaican economy with inflation to be higher than projected owing to a number of factors such as the impending increases in utility rates.

All three major utilities, electricity, water and telecommunications are seeking an increase in tariff rates.

Two of them, the Jamaica Public Service Company and the National Water Commission, have already applied to the Office of Utilities Regulations for a review of their tariff charges, which are now being assessed for consideration.

The BOJ head argued that the impending adjustments in some regulated prices (water and light) would affect inflation in the near-term.

The increased inflation outlook is also being blamed on higher imported inflation, which is largely as a result of the projected higher oil prices, which should contribute to increased domestic energy and transport-related prices.

The current inflation rate for the 12 months leading up to July 2020, as measured by the Statistical Institute of Jamaica is 5.7 per cent.

This out-turn in headline inflation reflects the impact of higher food prices, mainly agricultural commodities. Inflation have been trending upwards in recent months to 4.2 per cent for the year to July 2020, where the out-turn for July reflects increased prices for health services, personal care goods and some processed food items, consequent on higher demand for these goods and services.