Jamaica’s economy chalked up some notable successes this year more pointedly, improved fiscal deficit a, primary surplus and increased revenues.

The country recorded a Current Account Surplus (CAS) of US$241 million, the first surplus in over two decades. As at end of June 2023, all indicative targets and structural benchmarks under the IMF Precautionary Liquidity Line and the Resilience and Sustainability Facility have been achieved.

Speaking at a press briefing held yesterday in Kingston, Economic Programme Oversight Committee (EPOC ) Chair Keith Duncan said: “ For April to September 2023, Revenue and Grants of J$427.1 billion surpassed the Second Supplementary Budget by $8.4 billion. This comprised Tax Revenue of $390.1 billion and Non-Tax Revenue collection of $32.5 billion. In comparison to the same period in 2022, the Revenue and Grants increased by $55.1 billion, reflecting increased economic activities and) ongoing improvements in Jamaica’s labour market.

“Total Tax Revenue for the review period outperformed the Second Supplementary Estimates by $6.9 billion demonstrating a $49.7 billion improvement compared with the performance for April to September 2022. This favourable outturn, in relation to the budget can be attributed predominantly to increased receipts from:

. PAYE (ahead by $5.3 billion)

.SCT (imports), higher by $2.9 billion.”

Expenditure was in line with the budget. Capital Expenditure, totalling $22.3 billion, fell $4.6 billion below the budget for the period due to a slower than planned execution of capital projects. The Central Government operations for the initial half of FY2022/23 generated a fiscal deficit of $27.7 billion and a primary surplus of $56.2 billion which were both better than the Second Supplementary Estimates by $8.6 billion (23.6%) and $12.5 billion (28.7%) respectively. What does this mean?

The fiscal deficit was lower than expected.

On the Current Account Surplus (CAS), Duncan said: “ Jamaica recorded a Current Account Surplus of US$352.4 million for FY2022/23. This surplus marks a milestone achievement, representing the first time in decades that Jamaica has not reported a current account deficit. This CAS was driven by the robust recovery in tourism and travel, increased exports and continued strong inflows from remittances.

“This positive performance continued into the first quarter of FY2023/24, where Jamaica recorded a CAS of US$241 million, an improvement of US$227 million over the US$13 million surplus recorded for the same quarter in FY 2022/23. This progress was driven by the US$34.4 million increase in the services account underpinned by tourism and travel, increases in exports of US$50 million and a US$105 million reduction in imports. Marginally lower secondary income was observed with the major contributor being strong remittances, which continues to be significantly ahead of 2019 net inflows.”

Tourism

Jamaica’s tourism product continues to do very well and the upcoming winter season is expected to be a bumper one. Only last week, Minister of Tourism Ed Bartlett announced that 1.05 million airline seats from 6000 US. flights were expected this winter. With a projection of 1 million, it s very likely to be the best winter season in Jamaica’s tourism history.

In the September 2023 quarter, Jamaica welcomed 678,057 tourists, a year-over-year increase of 9 per cent which is more moderate compared to the 53 per cent increase recorded for the same period in 2021. Visitor arrivals for the September 2023 quarter showed a 7.7 per cent increase compared to the pre-pandemic period of September 2019. Despite predictions of weakness in source markets, it is anticipated that visitor arrivals will continue to improve.

Growth of the Jamaican economy is in line with many of the economies around the world as many countries grapple with inflation, anaemic productivity and the effects of two major military conflicts – one in Europe the other in the Middle East.

The Planning Institute of Jamaica (PIOJ) estimated real GDP growth of 1.9 per cent for the September 2023 quarter relative to the corresponding quarter in 2022.

For FY 2023/24, the PIOJ projects real GDP growth within the range of 1.0-2.0 per cent down from 4.7 per cent for FY2022/23. This projection is largely underpinned by continued expansion in most industries, higher employment resulting in increased domestic demand. Strong growth momentum is projected for the mining sector and the Hotels and Restaurants industry and related industries.

Inflation

Inflation continues to be a thorny issue and a cursory look at supermarkets across the country will tell you why. Nevertheless, the 12-month point-to-point inflation rate of 5.1 per cent at October 2023 was within the Bank of Jamaica’s (BOJ) target and lower than the outturn of 5.9 per cent at September 2023. The inflation rate is now within the BOJ’s 4 to 6 per cent target range. However the BOJ projects inflation to rise above the range over the upcoming quarters.

EPOC Chair Keith Duncan noted: “ Despite inflation falling within the BOJ’s target range for the second consecutive month, it is projected to rise above the BOJ’s target range between December 2023 and March 2025 quarters. The projected acceleration in inflation primarily reflects the announced increases in selected public passenger vehicles (PPV) fares in October 2023 and April 2024.

The Central Bank’s Monetary Policy Committee (MPC), however, acknowledged that the inflation outlook could be skewed to the downside and could be lower than projected, albeit predominantly attributed to fiscal measures aimed at cushioning the impact of the increase in PPV fares which were announced by the Government. Other factors include the relative stability observed in core inflation, the outlook for oil prices to trend downwards and the likelihood of the United States Federal Reserve Board maintaining its policy rate in the near term.

“Upside risks to the inflation outlook include higher than projected wage adjustments in the context of a tight labour market, second round effects from the PPV fare increases and sharp increases in domestic agricultural price inflation over the near term. The MPC also noted that future monetary policy decisions will depend on incoming data relative to the strength of the potential risks in inflation and maintains that the BOJ is committed to using the full sets of tools at its disposal including further tightening of monetary policy, if the upside risks to inflation materialise.

It really is a case of whether the government prioritises growth or seeks to temper inflation. It is a conundrum it will be contending with over the next few months as it looks for the green shoots of spring to reveal themselves.

Duncan concluded: “ Higher interest rates and a tight monetary policy, if sustained in the ‘higher for longer” scenario, could create a real dilemma for the Government and the BOJ balancing the upside risks for inflation and the downside risks for GDP growth, as the impact of a sustained tight monetary policy begin to take greater hold on the private sector. This could slow domestic investments, spending, economic activities, and tax revenues which could have a negative impact on the macroeconomic assumptions and specifically the fiscal projections.”