The Economic Programme Oversight Committee  (EPOC) has indicated that it is heartened by the progress made by and management of the Jamaican economy.

Speaking at a quarterly briefing held at JMMB’s headquarters on Haughton Terrace in St Andrew. EPOC Chairman Keith Duncan said the committee was happy to see that inflation came out at 9.3 per cent for September, relative to the 10.2 per cent recorded for August.

However, the Bank of Jamaica’s Monetary Policy Committee, in its deliberations, believed that conditions have not sufficiently solidified to ensure that inflation is sustainably on a downward path. This saw it moving to increase the interest rate by a further 50 basis points in September.

FISCAL PERFORMANCE COMMENDABLE

Net international Reserves (NIR) remain strong at over US$3.81 billion. Revenues & Grants and the fiscal and primary balance targets outperformed budget targets. Real GDP growth of 4.8 per cent was recorded for the April-June 2022 quarter and is projected to fall within the range of 2.0 per cent – 3.0 per cent for the July-September 2022 quarter.

The fiscal performance was also commendable.

Revenues & Grants surpassed budget and continue to outperform the previous year’s performance.

For the April to August 2022 period, total Revenues & Grants of J$297.8 billion was J$30.9 billion (11.6%) ahead of budget, primarily due to higher than budgeted tax and non-tax revenues. This positive performance remained ahead of the outturns for April to August 2021 by J$28.4 billion (10.6%), supported mainly by increased economic activity and higher than projected value of imports.

Tax revenue outperformed budget target and the previous year’s performance.

Total tax receipts of J$277 billion for the review period reflected a surplus of $27.6 billion (11.1%) relative to budget. This outturn was also above earnings of $218 billion for April-August 2021. The higher than budgeted tax revenue was mainly attributed to stronger than programmed:

1. Special Consumption tax

2. General Consumption tax

3. Travel tax

4. PAYE collections (reflecting improved labour market conditions)

Duncan concluded that Jamaica’s economy continues to show strong signs of recovery, however risks to a sustained growth path are elevated.

“Notwithstanding an easing of supply chain disruptions and the moderation in commodity prices, the pace of growth in the global economy has been negatively impacted by relatively high inflation rates internationally and is likely to have knock on effects on the Jamaican economy,” the EPOC chairman declared.

“The reported labour shortages in selected sectors of the Jamaican economy and pressures from our recent inflation experiences pose the potential for future wage adjustments, which could possibly result in protracted inflation. However, assuming no additional shocks, annual inflation rates should trend towards the lower bound of the 9.0 per cent to 11.0 per cent range for the remaining months of 2022.”

The EPOC chair observed that the Bank of Jamaica continues to implement tightened monetary policies, as its Monetary Policy Committee is not convinced that inflation is on a sustainable downward path. The Bank of Jamaica has noted that risks to inflation remain balanced. However, the uncertainty created by the US Fed’s hawkish forward guidance could see interest rates rising to higher levels than previously expected.

Duncan continued: “Jamaica’s balance of payments are currently at sustainable levels and Jamaica’s international reserves are more than adequate to support the continued stability in the foreign exchange market, which will minimise the impact of imported inflation. However, in the medium-term, as the United States, Jamaica’s primary source market for visitor arrivals, faces a further slowdown in their economy, we could see a slowing of tourism arrivals, along with a continued marginal decline in net remittance inflows, which could have a marginal or a slowing of the build of Jamaica’s more than adequate international reserves.

“While tax revenues continue to exceed the budget, EPOC expects that the Government of Jamaica could see inflationary pressures in their projected spend for the rest of FY2022/23. It is expected that these factors will be highlighted in the upcoming supplementary budget. EPOC continues to be supportive of the Government’s efforts to cushion 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. We expect that the Government will continue to be fiscally responsible and manage within the fiscal rules ensuring continued macroeconomic stability and debt reduction.

“EPOC’s outlook is for the Jamaican economy to continue on its projected recovery path and be back at pre-COVID levels by the end of the 2022-23 fiscal year. However, the prospects for sustained growth of the local economy are uncertain for fiscal year 2023-24 and into the medium term due to the continued and elevated geo-political tensions, inflation and interest rate risks.”