Economic growth picked up in 2018 over 2017 with Alpart Alumina plant resuming production and major road works, increased activity in building of housing, hotels and commercial buildings as well as continued growth in the tourism sector and other service sectors.
As the end of 2018 approached, concerns about the continued robust strength in the Global Economy surfaced with forecast for slower growth worldwide. There were even concerns that the United States could well be entering a recession in 2019 as the Fed increased interest rates and some industries starting to report softer performance.
Foreign exchange movement has been relatively stable, after climbing briefly to J$138 to the US dollar, before backing down with the central bank’s B-FIXITT buying earlier in the year to close the year below J$128 to the US dollar. The revaluation took place sometime after the central bank sold funds into the system, in the usually dryer period for foreign exchange inflows relative to demand ahead of the Christmas period.
Deflation over the first 5 months of the year encouraged a decline in interest rates, which influenced an adjustment in the FX rate and an uptick in the inflation rate, with the inflation for the period to October being 3.5 percent. November ended with zero inflation and December looks as if it will record levels similar to November and should leave the inflation for the twelve months around 3.5 percent. Interest rates are at now the lowest on record with Treasury bill rates hitting a low of 1.7 percent during the year but climbed back to 2.06 percent in December. Technical reading suggest that T-bill rates could trend up to 2.5 percent in 2019. The price of oil could change this, if it remains around US$50 per barrel for a prolonged period in 2019.
Expect growth to increase as improving government fiscal numbers allow for more spending on infrastructure and social services such as health, education and crime fighting. The improving fiscal position with debt to GDP continuing to fall, will maintain downward pressure on interest rates and magnify the case for tax adjustment. Increasing productivity by many businesses will result in low inflation as companies moderate price adjustments. Bank lending is projected to rise, aided by low interest rates that will encourage increased borrowing by customers. Unemployment levels will continue declining with increased employment that will increase spending as real growth in the economy continues to picks up, resulting increased demand for more workers. Government divestments should see some high profile sale that will place added cash in government’s coffers.
Imports increased but a big hike in the price of petroleum on the world market helped to push total imports above normal levels. Oil prices declined in late 2018 and carrying over to 2019 and the country Jamaica should see a decline in the category. The fall in world oil price below $50 per barrel, will reduce foreign exchange demand in 2019 and could result in a large amount of foreign currency savings for the country depending on how long the depressed prices last. The savings along with low inflation and increased productivity could pressure the value of the Jamaica dollar into some revaluation. The other factor of note is the switch over of new 190 MWH gas powered electricity generating plant along with the solar plant to come on stream in 2019 that will reduce imports of petroleum for power generating.
During 2018, road construction in the Kingston area caused dislocation for some businesses, resulting in lower sales, this will carry over into the first half of 2019 but should start to ease in the second half as some are completed are substantially complete.

The tourism sector performed in an incredible way in 2018, rising 5.3 percent, for the period, January to October over the similar period in 2017. Stopover arrivals jumped 12.7% in 2017 over 2016, with May to October rising 16.8 percent in 2017, but 2018 was still able to increase 5.5 percent over the robust 2017 increase 2018 is just incredible. The sector should continue to grow around 5 percent for the coming year and bring in another US$150 to $200 million over 2018.
Real Estate should continue to benefit from low mortgage rates and increased disposable income and greater stability of the local currency that will discourage funds going into the US dollar as the ideal investment vehicle. There was no sign that mortgage rates declined in 2018, in response to the sharp fall in Treasury bill rates, as such there is likely to be downward adjustments in mortgage rates during the year.
The Business process outsourcing sector is one of the fastest growing BPO is one of the fastest growing industries, employing around 30,000 individuals with over 55 active entities operating across the island and is said to contributing in excess of US$450 million to Jamaica’s economy. Based on current trajectory, the sector is estimated to grow at a rate of 20 percent per annum and is on a path to contribute more than US$750 million by 2020. A company operating in the sector is expected to list on the JSE in 2019.