Increase in Commercial Bank Loans to Businesses

Commercial bank credit to the private sector has increased by 6.2 per cent in the December quarter, over the previous quarter, with 7.3 per cent of the loans going to businesses.  

This was disclosed by Governor of the Bank of Jamaica (BoJ), Brian Wynter as he presented the Quarterly Monetary Policy Report (QMPR) of the Bank at its Nethersole Place headquarters downtown, Kingston on Tuesday (Feb. 21).

According to the Central Bank Governor, the credit increase in the December quarter was the “fastest rate of growth since the June 2008 quarter."

He noted that the growth in private sector credit “mainly reflected expansion of 7.3 per cent in loans to the business sector, a reversal of the earlier trend where increases in personal loans were dominating the marginal growth in credit.  The growth in credit was largely to the sectors being projected to record continued expansion for the rest of the fiscal year."

According to Mr. Wynter, in addition to relatively strong growth in private sector credit, the Bank’s forecast for real Gross Domestic Product (GDP) growth is “reinforced by the results of the recent Inflation Expectations Survey which showed an improving trend in the business sector’s perception of present economic conditions."

He explained that the perception of future economic conditions showed a sharp recovery after a decline recorded in the survey, which was done in the September 2011 quarter.

“These are encouraging signals which point to continued strengthening in real sector activities,” he declared.

Governor Wynter was upbeat about the expected performance of macroeconomic indicators for the near term, which he said continues to be largely positive. However, he expressed a note of caution with respect to “some uncertainties which threaten the inflation forecast. In particular, recent geo-political developments in the Middle East are a threat to the projection for crude oil prices."

He also stated that while the possibility of stronger growth in the United States “bodes well for Jamaica’s growth outlook”, it could also lead to a higher price for crude oil, which has “a pervasive impact on domestic inflation."

The Central Bank Governor further observed that the weakness in the fiscal accounts and the possible measures that a “correction will necessitate continue to generate concerns”. 

With respect to discussions on the country’s re-engagement of the IMF for a medium-term programme, he believes that this development “portends well for confidence and should alleviate some of the uncertainties in the domestic financial market."

By Allan Brooks, JIS Senior Reporter