THE central bank is projecting weaker growth in deposit takers’ offerings of private sector credit over the next eight quarters.

The bank is also forecasting tighter liquidity conditions and a contraction in economic activity over the period.

In its quarterly Monetary Policy Report for the June quarter published on August 19, the Bank of Jamaica (BOJ) stated that private sector credit is projected to grow at an average rate of 8.1 per cent up to the June 2024 quarter, compared to the previous forecast, for an expansion of 10.0 per cent.

It noted that the projected annual expansion over the near term reflects a slightly less optimistic economic outlook amid the continued recovery from the impact of the pandemic.

“The weaker growth, relative to the previous forecast, is influenced by the impact of contractionary monetary conditions,” the BOJ said, pointing out that this followed its decision to further increase the policy rate in the June 2022 quarter.

With lending institutions beginning to pass on the policy rate increases to the price of loans, the pace of loan growth is expected to slow.

Private sector loans and advances were below that of the previous quarter, the BOJ reported.

Loans and advances, including domestic and foreign currency-denominated loans, to the non-financial private sector by deposit-taking institutions expanded by 9.3 per cent at May 2022.

This was below the growth of 9.0 per cent as at March 2022. Relative to gross domestic product (GDP), the stock of private sector loans at May 2022 was 44.6 per cent, below the ratio of 46.0 per cent a year earlier. The growth in total loans and advances was underpinned by expansions in loans of 11.9 per cent and 5.8 per cent to individuals and the productive sector, respectively.

Growth in loans to the productive sector was mainly attributed to increases in loans to the distribution and professional and other services industries.

The BOJ, meanwhile, noted that money supply is projected to expand at an average annual rate of 7.7 per cent over the next eight quarters, below the previous projection of 9.6 per cent.

The pace of broad money growth is anticipated to reflect expansions primarily in local currency deposits as well as currency in circulation over the near term.

The central bank said that the near-term growth projection for broad money is weaker than previously forecast, in light of tighter monetary policy and liquidity conditions.

“Real monetary conditions are also expected to be more contractionary, coupled with a less optimistic outlook for real economic activity over the next eight quarters,” the bank said.