Dr Jide Lewis, deputy governor, monetary establishments supervisory division (left) and Richard Byles, Governor of the Financial institution of Jamaica.
WITH financial progress slowing and considerations mounting over a possible recession, Financial institution of Jamaica (BOJ) has signalled {that a} clearer evaluation of Jamaica’s trajectory will solely emerge after the March quarter, when extra information on remittances, inflation, and enterprise exercise turn out to be obtainable.
Governor Richard Byles, addressing reporters at BOJ’s first financial coverage press convention for 2025, acknowledged that two consecutive quarters of damaging GDP progress technically qualify as a recession. Nonetheless, he maintained that broader financial indicators — equivalent to excessive employment ranges and secure enterprise confidence — recommend the downturn might not be extended. The central financial institution is now taking a cautious strategy, opting to “wait and see” earlier than making definitive coverage shifts.
Jamaica’s economic system is estimated to have contracted by 1.8 per cent within the December 2024 quarter, following a 3.5 per cent decline within the earlier quarter. Whereas the decline has raised considerations, BOJ argues that the contraction was closely influenced by weather-related disruptions — together with Hurricane Beryl’s impression on agriculture and mining. The financial institution additionally pointed to relative stability within the alternate fee and declining inflation as indicators that the economic system stays resilient.
“The info will inform us whether or not we’re in a protracted recession or a brief one that we’ll come out of shortly,” Byles mentioned, indicating that the central financial institution can be monitoring remittance inflows, shopper spending, and credit score progress over the approaching months to gauge the economic system’s true route.
One of many greatest components influencing the financial outlook is remittance inflows, which stay a key pillar of overseas alternate earnings and family spending in Jamaica. BOJ has expressed concern about potential US coverage adjustments underneath a brand new Administration, notably if restrictions on remittance transfers from non-citizens are applied.
“If restrictions are positioned on remittances it would actually impression flows into Jamaica and corporations equivalent to Lasco and GraceKennedy, which function within the sector,” a journalist identified throughout the press convention. Byles agreed, stating that BOJ is watching to see how these insurance policies evolve.
In the meantime, the US Federal Reserve’s stance on rates of interest additionally looms massive. The Fed has indicated that it’ll maintain charges regular for the close to future, which may have an effect on funding flows and the demand for overseas alternate in Jamaica. BOJ stays cautious, suggesting that additional changes to financial coverage could also be wanted relying on how these world dangers unfold.
Past remittances, BOJ can be monitoring shopper credit score and mortgage progress, which may present perception into financial confidence. Latest information recommend that whereas mortgage progress continues, it has slowed — from 13.7 per cent progress in earlier years to about 5 per cent progress in 2024. Byles famous that the banking sector stays well-capitalised however hinted that the central financial institution can be paying shut consideration to credit score demand within the coming months.
Inflation, whereas remaining inside BOJ’s goal vary of 4 to 6 per cent, is one other space of concern. Whereas the financial institution believes inflation will keep managed, there are upside dangers together with larger delivery prices and pending will increase in public transportation fares. BOJ confirmed that it has not been consulted on the potential inflationary impression of taxi fare hikes, elevating additional questions on price of residing pressures.
Including one other layer of complexity, Jamaica is in an election 12 months, which may affect each financial insurance policies and enterprise sentiment. Traditionally, election cycles have coincided with elevated authorities spending and shifts in investor confidence. BOJ is prone to weigh these components fastidiously because it navigates financial coverage choices within the months forward.
Whereas some economists argue that Jamaica is already in a recession, BOJ stays hesitant to make that decision, preferring to analyse a fuller information set after the March quarter.
“What’s the conclusion we draw from these two quarters of a recession? Is it that the sky is falling, or is it that there are different components suggesting that is solely short-term? We have to see extra information earlier than making that decision,” Byles defined.
Within the meantime BOJ has held coverage fee regular at 6.0 per cent till March 27, when the Financial Coverage Committee (MPC) subsequent meets. The choice, unanimously agreed on by the central financial institution’s MPC, marks a shift from BOJ’s 4 consecutive fee cuts in late 2024. Between August and December 2024 the central financial institution trimmed charges by 100 foundation factors, responding to inflation cooling from 7.4 per cent in January 2024 to 4.7 per cent in January 2025.
