The Bank of Jamaica (BOJ) is projecting a partial rebound in economic growth of about three per cent, in the aftermath of the coronavirus (COVID-19) pandemic, commencing in fiscal year 2021/22.
Governor, Richard Byles, says the out-turn could possibly be as high as eight per cent, “if there is strong recovery in tourism”.
“However, the Jamaican economy is not expected to return to pre-COVID-19 levels before at least fiscal year 2022/23,” Mr. Byles added, at the Central Bank’s quarterly briefing in downtown Kingston on Thursday (November 19).
Mr. Byles said the Statistical Institute of Jamaica’s (STATIN) June 2020 quarter growth out-turn, showing an 18.4 per cent contraction in domestic economic activity, was a “sobering” indication of the extent of the pandemic’s impact on the country.
He said the effect was also evident in employment, noting that STATIN’s labour market survey showed that approximately 12.6 per cent of the labour force was unemployed as at July 2020, up from 7.8 per cent the previous year.
“We expect that the worst is behind us with the June quarter. Nonetheless, our latest projection for the end of fiscal year 2020/21 is for real economic activity to contract in the range of 10 to 12 per cent, somewhat more than our previous projection of seven to 10 per cent,” the Governor told journalists.
Mr. Byles said despite the fallout in economic activity due to COVID-19, the financial system has remained resilient throughout the pandemic.
He advised that the BOJ’s regular assessment of deposit-taking institutions’ (DTIs’) balance sheets indicates that they are “more than adequately” capitalised and in compliance with prudent liquidity standards.
“Loan quality for the system, while naturally showing a small deterioration, remains well below [the danger] threshold. Specifically, the ratio of non-performing loans to total loans increased to 2.8 per cent in September 2020, compared with 2.4 per cent in September 2019, well below the benchmark of 10 per cent,” the Governor outlined.
At the same time, Mr. Byles added that “DTIs’ provisioning remains sufficient to withstand credit losses”.
“We will continue to closely monitor the trends in loan quality, given the heightened risks,” he further said.
In relation to Jamaica’s external accounts, Mr. Byles said notwithstanding the fallout in tourism flows, the BOJ expects that the current account deficit of the balance of payments will remain at sustainable levels of two to four per cent of gross domestic product (GDP) over the next two years.
“This is better than previously expected, supported by stronger than expected remittance inflows, a dramatic fall in imports as well as lower levels of private capital outflows,” he noted.
In this regard, Mr. Byles said Jamaica’s reserves remain “healthy”, with net international reserves at the end of October totalling approximately US$2.9 billion.