The EPOC met on May 29, 2018 and reviewed the latest available results for the period ending March 2018.
Revenue & Grants of $560.8for the fiscal year (April –March) exceeded the budgeted amount of $553.6B (+1.3%).Tax collections of$496.9B outperformed budget (+$7.0B). Expenditure for the fiscal year (April – March) was $7.6B below budget (-1.4%). Of this amount, Recurrent Expenditure was $5.9B below budget, while Capital Expenditure was $1.7B below budget (-3.5%). As a result of the Revenue and Grants performance and the under-expenditure for the fiscal year, the Primary Balance of $143.9B exceeded the $131.5B budget target for April 2017-March 2018.
TARGETS MET FOR FISCAL YEAR 2017-18
“Despite the Bank of Jamaica (BOJ) reducing interest rate five times since last July, further and more robust downward adjustments may be needed to overcome the sluggishness of the economic recovery.”
For the Fiscal Year 2017/18 ending March 31, 2018, Jamaica met all its Quantitative and indicative performance Criteria. The GOJ Tax Revenues came in at $496.9b exceeding projections by $7.0b. Total Expenditures were $7.5b below budget. This outturn of Tax Revenues and Expenditures contributed to a Primary Balance Surplus of $143.9b which exceeded the target of $132.0b, under the SBA, by $11.9b. The GOJ ran a Fiscal surplus of $8.7b which has not been the norm for Jamaica, as the last time a Fiscal Surplus was achieved was in FY 2013/14.
Monetary Quantitative Targets have been significantly exceeded with Non-borrowed Reserves being at US$2.4b, ahead of the target of US$1.9b. Inflation is contained at 3.9 percent, outside of the BOJ’s target range, but within the Programme range. The risk to inflation is, however, to the downside.
All seven (7) macro-fiscal structural bench-marks for the November 2016 to April 2018 period were met. The GOJ has alsomet the fourteen (14) structural benchmarks for public sector transformation, public bodies and public service reform through end-April 2018.
PROGRAMME RISKS & MITIGATING STRATEGIES
The Committee would, however, like to note areas of risk and the mitigating strategies that have been put in place by the GOJ and the BOJto address these:
“Tax Revenue missed Supplemental targets for the period January through March 2018 (Q4)” While the Tax Revenues were ahead
of budget for the Fiscal Year 2017/18, EPOC notes that the Tax Revenues in the months of January, February and March 2018 came in 3 percent below or $4.5b below the cumulative target of $148.36b that was set in the First and Second Supplemental Budgets tabled in FY 2017/18. EPOC will continue to monitor closely Tax Revenues in the 2018/19 Fiscal year.
Monetary Targets: Inflation
- It is important to note that the 12 month point to point inflation rate of 3.2 percent at April 2018, was below the BOJ target range of 4 to 6 percent, and outside of the IMF revised quantitative performance criteria band of 3.5 to 6.5 percent, which comes into effect in June 2018.
- A low inflation out-turn can be received as positive, but it does have implications for Programme targets,specifically fiscal targets linked to Nominal GDP such as the Debt to GDP targets and 9 percent Wage to GDP Fiscal Rule (2018/19).
• Effective May 17, 2018 the BOJ lowered its signal rate to 2.50 percent per annum. This adjustment to the policyrate reflected the BOJ’s assessment that inflation for the next three quar ters could fall slightly below the lower end of the 4-6 percent target.
GDP Performance 2017/18
The PIOJ estimates that real GDP has grown by 0.8 percent for FY2017/18, which is below the Programme target of 0.9 percent. The BOJ has indicated that the ongoing economic recovery continues to be sluggish, and that “there may still be a need for further and more robust downward adjust ments in the policy rate.”
THE BANK OF JAMAICA’S ACCOMMODATIVE STANCE
The BOJ Governor shared in his recent Quarterly Press Briefing that “in the context of the benign outlook for inflation, Bank of Jamaica will continue to have an accommodative policy stance aimed at steering inflation towards the Bank’s target of 4-6 percent.”
Public Sector Wage Negotiations and the 9 percent Wage to GDP Fiscal Rule (2018/19). The wage negotiations between the GOJ
and the Public Sector workers continue and remain an outstanding item in the new Financial Year 2018-19. We are pleased that
the GOJ and Jamaica’s Teachers were able to sign off on a wage package. EPOC continues to be hopeful that an agreement will be concluded with all the remaining Stakeholders, including the Police and the Nurses, in keeping with Jamaica’s legislated 9 percent Wage to GDP Fiscal Rule for 2018/19.
EPOC welcomes the Minister of Finance, Hon. Dr. Nigel Clarke’s policy position of enhancing Jamaica’s Fiscal Responsibility
framework through the concept of an In- dependent Fiscal Council.
JAMAICA’S INTERNATIONAL COMPETITIVENESS - FOREIGN EXCHANGE MARKET
On 22 May 2018, the value of the Jamaica Dollar vis-à-vis the USdollar was J$127.01 = US$1.00, reflecting a depreciation of 1.34%
($1.68) for the month to date. This follows appreciation of 0.53% ($0.66) for April 2018.
REAL EFFECTIVE EXCHANGE RATE (REER)
At April 2018, Jamaica recorded an annual point-to point loss of 1.8% in relative price competitiveness, as measured by the real effective exchange rate (REER). This loss was mainly driven by higher domestic inflation of 3.2 per cent, compared with inflation of 2.2 per cent among Jamaica’s trading partners.