KINGSTON. Jamaica May 23, 2021 - Bank of Jamaica (BOJ) Governor, Richard Byles, says the BOJ “continues to be very successful in guiding inflation within the four - six per cent target range despite missing its inflation target for the 12 months leading up to April 2021.
Over the past 40 months leading up to April 2021, inflation has been below 6.0 per cent (which is the upper bound of the target range) on 38 occasions, or 95 per cent of the time.”
Speaking at the BOJ’s quarterly briefing on Friday, Mr. Byles said in spite of the fact that consumers are feeling the effects of rising global commodity prices, he does not expect global commodity prices to exceed current levels.
He said despite the price increases, the forecast for inflation is to remain within the target range of four to six per cent.
"Inflation is projected to average 4.8 per cent over the next two years, a forecast that anticipates that commodity, oil and grain prices will not rise much beyond current levels. We anticipate that this will directly affect domestic transport on processed food inflation," he pointed out.
The BOJ Governor emphasised that, “as I have said in the past, the main reason for inflation going above the target on the two occasions was temporary increases in agricultural prices due to either droughts or floods. On the flip side, inflation fell below the lower end of the target on 15 occasions over the period, again mainly due to volatility in agricultural prices as well as declines in international oil prices.”
However, Byles noted that signs of incremental improvement in the economy are beginning to emerge, and are evidenced in the indicators related to employment and growth, among other areas impacted by the coronavirus (COVID-19) pandemic.
Speaking at the BOJ’s quarterly briefing on Friday, Mr. Byles said the latest data released by the Statistical Institute of Jamaica (STATIN) indicated an unemployment rate of 8.9 per cent as at January 2021, up 1.5 percentage points compared to the corresponding period 12 months earlier.
This, he said, represents an improvement, relative to the 10.7 per cent recorded in October 2020. “When account is taken of the seasonal patterns in employment, these statistics suggest that more than 25,000 jobs were restored between October 2020 and January 2021, following the approximately 40,000 jobs that were added between July and October last year,” the Governor pointed out.
Mr. Byles said the same pattern of improvement continues to be evident in the growth figures as STATIN’s most recent growth data showed that domestic economic activity contracted by 8.3 per cent for the October to December 2020 quarter.
“Using the quarter over quarter change in the seasonally adjusted real gross domestic product (GDP), as reported by STATIN, the out-turn for the December quarter relative to the September quarter reflected a growth of 0.9 per cent,” he explained.
Mr. Byles said despite the out-turn showing some improvement, the Bank continues to project that growth for the fiscal year 2020/21 fiscal year will contract in the range 10-12 per cent.
“We then expect a partial rebound of at least five per cent in economic activity to commence in fiscal year 2021/22, and could possibly be as high as eight per cent, if there is strong recovery in tourism and tourism-related activities,” he added.
Mr. Byles said it is likely that growth could trend towards the top end of this forecast range, given the higher than anticipated pace of inoculations, the anticipated release of pent-up vacation demand from this development and the impact of the significant fiscal and monetary stimuli in Jamaica’s major trading partner – the United States of America (USA).
He pointed out that the main downside risk to this projection relates to the domestic spread of the COVID-19 virus and efforts to control it.
“If Jamaica’s stringency measures have to be enhanced and protracted, retrenchment in travel and disruptions in the production and distribution of goods could occur,” Mr. Byles indicated.