THE Bank of Jamaica (BOJ) says interest rate hikes it has undertaken since October last year, to cool runaway inflation, are not threatening the economic growth that has spanned six consecutive quarters so far, with expectations that the recovery will continue into next year.

“Whilst there are concerns about a slowdown, we don’t see a recession as a major risk,” Dr Wayne Robinson, senior deputy governor of the Bank of Jamaica, told a press conference on Tuesday.

Jamaica’s economy has recorded growth in every quarter, since a 15.6 per cent contraction between April and June 2020. However with talks that the US economy could be heading for a recession in the next year, according to growing warnings from banks and economists, fears have been expressed locally that if it does materialise, Jamaica will not be spared.

Robinson told journalists in attendance that the Federal Reserve and several other entities have not forecast a recession in the world’s largest economy, arguing that the labour market is still very strong in the US, with two jobs per person seeking employment.

“You’d notice that we haven’t really shifted our forecast significantly,” Robinson continued. “We are still looking at 2 to 4 per cent [growth] for this fiscal year,” he added in a nod to the forecast for growth between April 1, 2022 and March 31, 2023. Growth figures for the full 2021/22 fiscal year which concluded on March 31, 2022 are still being tabulated, but Richard Byles, governor of the BOJ, said the expectation is that it will come out at 7 per cent to 10 per cent.

“The capacity that we have left to continue to drive growth is significant, for example in the tourism business. My understanding is that the capacity that tourism is at now is 70 per cent of what the pre-pandemic capacity was, so we have some way to go in that external sector of the economy. We also have a major alumina plant that has been down that should come back up in about June of this year, so I see those two sectors as having a very positive impact on growth this year. And, the tightening that we are doing should not affect the growth of 7 to 10 per cent up to March of this year nor the 2 to 4 per cent for 22/23.

Runaway inflation which reached 11.8 per cent in April has seen the central bank respond so far with interest rate hikes at the centre of a slew of measures implemented to cauterise price increases. Economists and business leaders have so far expressed concerns that the action could scupper fragile economic growth in an economy that while recovering, is still weak.

Byles, while acknowledging the risk, says there are no inherent dangers at this moment of the BOJ action sending the economy into a recession.

“That is something that is a delicate path to walk and we do give that consideration very close attention at MPC [monetary policy committee] . What, if any signs we are seeing of recession, when you look at the labour statistics, we don’t see it. When we look at the GDP outturn for December, we don’t see it. So, we feel pretty confident that we are not yet putting the economy at risk to the extent of putting it into a recession,” the BOJ governor pointed out.

“The risk to GDP is tilted to the downside,” his senior deputy governor added. “We know that there are risks to the global economy. We’ve seen the slowdown in China because of the COVID lockdown, and that is exacerbating supply chain conditions there. We know that higher inflation can affect consumption globally so there are indeed headwinds, but these are the things we try to balance when the MPC comes to a decision on policy rates.”