The Jamaican economy is showing encouraging progress with some key data pointing to commendable fiscal management.

During a press briefing today (July 20), the Economic Programme Oversight Committee (EPOC), chaired by Keith Duncan, gave an overview of the fiscal and monetary quantitative performance indicators under the Government of Jamaica’s Economic Reform Programme.

Given the backdrop of the global economy and the ongoing war in Ukraine, Duncan said: “Inflation continues to be way beyond the targeted range of four to six per cent, coming in at 10.9 per cent in June 2022. The Bank of Jamaica projects that inflation over the next two years could range between eight and nine per cent. The Bank of Jamaica has added another 50 basis points to move their policy rate to 5.50 per cent, which brings it closer to the rate they consider to be appropriate as stated in their Monetary Policy Committee statement. The next policy announcement is slated for August 18.”

For the fiscal year 2021-22 and April-May 2022, Revenue and Grants and the fiscal Primary Balance targets outperformed budget targets.

Net International Reserves (NIR) remain strong and stand at US$3.8 billion as at June 2022. This is higher than required by the fiscal adequacy benchmark.

Real GDP growth was 8.2 per cent for fiscal year 2021-22 and 6.4 per cent for the January to March 2022 quarter.

Duncan continued: “Revenues and Grants came in at 31 per cent of GDP. This exceeded the budget and nominally outperformed pre-COVID levels. The total of $720.6 billion ended the fiscal year, $3.1 billion ahead of the third Supplementary Estimates. This largely reflected the strength of the economy because of increased tourism receipts and the relaxation of the COVID restrictions. The uptick in business activity is encouraging.

“Year-over-year, tax revenues came in at $145 billion greater than the previous year of 2021 and ahead of pre-COVID levels by $70 billion. This means tax revenues have recovered beyond pre-COVID levels but nominally behind because, if you include inflation, it would be nominally ahead but in real terms behind if we included inflation in our calculations.”

TAX REVENUES EXCEEDED BUDGET OUTTURN

It is noteworthy that tax revenues of $616.4 billion for the fiscal year exceeded the budget outturn by $10.1 billion.

The outturn for tax revenues specifically was $110 billion ahead of 2021 and $37 billion ahead of pre-COVID levels.

Duncan explained: “What has been driving these tax revenues are companies declaring and paying their income tax, PAYE collections, special consumption tax on imports and tax on interest.

“While tax revenues are marginally exceeding budget, we expect that the Government of Jamaica will see inflationary pressures along with public sector negotiations begin to put pressure on the Government of Jamaica expenditures. EPOC remains supportive of the Government of Jamaica’s efforts to cushion the inflationary pressures on the most vulnerable and we are hopeful that, as fiscal space is available, our vulnerable will continue to be supported in a targeted manner. However, we do expect that the Government of Jamaica will continue to be fiscally responsible and manage within the fiscal rules ensuring continued macroeconomic stability.”

The Government has presided over a Primary Balance that was $90.2 billion over the previous year’s figure, coming in at $158.7 billion. As a result of that, there has been a significant reduction in the debt-to-GDP ratio with it falling to 94.2 per cent, a 15.5 per cent reduction from March 2021 when it was 109.7 per cent.

This was driven by growth in GDP by 8.2 per cent and higher than budgeted tax revenues and a better-than-programmed primary balance.

The Government remains firmly on track to make its debt-to- GDP target of 60 per cent by 2027-28 in line with the fiscal rules.

“EPOC is very cautious on the economy maintaining the growth momentum, as the global environment faces multiple risk factors including geo-political risks, supply chain dislocations, volatile energy and commodity markets, increased interest rates globally and locally, along with the projected global slowdown, especially in our main market, the USA, and COVID-19 in China. These risks could very well see reduced inflation and price stability, but these risks factors could likely create some downside risk for Jamaica’s continued projected economic recovery,” said Duncan.