CO-CHAIRMAN of the Economic Programme Oversight Committee (EPOC) Keith Duncan was careful in declaring that Jamaica had recovered from the economic fallout of the novel coronavirus pandemic, despite highlighting several positive economic indicators.
Among the positives, Duncan listed during a hybrid press briefing on Wednesday, July 20, was 8.2 per cent real gross domestic product (GDP) growth for fiscal year (FY) 2021/22. In the same vein, he pointed out that for the last quarter, January â€“ March 2022, GDP increased by 6.4 per cent relative to the same period in FY2020/21.
In addition, revenues and grants in FY2021/22 surpassed the budgeted target and exceeded pre-COVID levels by 10.9 per cent or $70.8 billion. In particular, tax revenues increased by 6.4 per cent above pre-COVID levels or $37 billion more than $649.8 billion collected in FY2019/2020.
Duncan noted that the increase in revenues and grants was due to increased economic activity, recovery in tourism, and the relaxation of restrictions to reduce the spread of the pandemic.
"All projections are that there will be continued recovery in tourism," he stated, adding that a report from the Jamaica Hotel and Tourist Association showed a 25 per cent increase in cruise ship arrivals.
However, he noted that in real terms, the increases in tax revenue did not translate to recovery, as the figures were only nominal.
"The tax revenues have recovered to pre-COVID levels in a nominal way, but if you were to take out the inflationary impact, we wouldn't be back to the real purchasing power of those tax revenues as yet. But nominally we are ahead of pre-COVID levels," he explained.
While projecting that the Jamaican economy should return to pre-COVID levels by December 2023, the EPOC co-chairman said, "Where we are cautious is there are so many risks on the horizon, the risks are reduced at this time but they still do exist."
The risks Duncan referred to include slowing demand in the United States of America, lockdowns in China's major manufacturing districts, supply chain disruptions and rising commodity prices which create imported inflation.
He added that projections are that inflation in Jamaica will continue to exceed the Bank of Jamaica's (BOJ's) target of between 4.0 and 6.0 per cent for the next two years. As at June 2022, inflation was at 10.9 per cent, which is below the central bank's peak forecast between 12 and 15 per cent.
In this regard, Duncan underscored the EPOC's support of the BOJ's increase in policy rate to 5.50 per cent as a measure to control inflation. While noting the effect of the interest rate increase on the private sector, he argued that it was necessary "to ensure the predictability of prices".
He also hailed the central bank's management of foreign exchange reserves and the foreign exchange rate. As at June, the US dollar valued approximately $151, representing a two per cent decline when compared with 6.1 per cent at the same mark in 2021.
"I think we're seeing movement by the Bank of Jamaica in looking to maintain greater foreign exchange stability in a more orderly market and we welcome that," Duncan said.
Another highlight of the EPOC co-chair's presentation was the Government of Jamaica's reversal of a fiscal deficit in FY2020/21 to a fiscal surplus in FY2021/22 of $21.7 billion.