Guyana to grow 86% in 2020

The International Monetary Fund (IMF) is projecting a stunning 85.6 percent growth in Gross Domestic Product for Guyana in 2020 with oil production scheduled to begin in early 2020.
The huge increase in economic growth projected for 2020, will be up from a projected 4.4 percent increase in 2019 and 4.1 percent actual growth in 2018.
According to the IMF, economic growth for the current year continues as the domestic economy extends the broad-based expansion across all major sectors. Growth is driven by continued strength in the construction and services sector ahead of oil production in 2020 and strong recovery in mining. The oil sector is projected to grow rapidly, accounting for around 40 percent of GDP by 2024 and supporting additional fiscal spending annually of 6.5 percent of non-oil GDP on average. This would boost non-oil GDP growth by 3.5 percentage points on average.

Oil drilling offshore Guyana

The external outlook is expected to gradually improve after the start of oil production in 2020, the IMF stated. “The current account deficit is projected to narrow from negative 22.7 in 2019 to negative 18.4 percent of GDP in 2020, with the commencement of oil exports. The deficit will be financed largely by FDI inflows and donor-supported investment. In the medium term, the current account balance will improve further as oil-related imports subside with the completion of oil fields and as oil exports from Liza II commence in 2022.”
“Public debt is projected to peak at 56.6 percent of GDP in 2019 before declining sharply from 2020, reaching 15.8 percent of GDP by 2024, as the incoming oil revenue significantly reduces borrowing needs and increases GDP”, the IMF reported.

TBill rates drop to 1.55%

Rates on Government of Jamaica Treasury bill dropped to 1.55 percent on the 30 days instrument in the latest issue auctioned on Wednesday, October 16.
The fall in rates follows applications for $2.2 billion of the Government of Jamaica Treasury Bills on offer and resulted in a notable fall in the average rates compared to the results at the September auction.
The October auction attracted $5.9 billion in bids, resulting in the 91 days instrument due January 2020, yielding an average rate of 1.54966 percent. The 182 days instrument due April 2020, produced an average rate of 1.64864 percent and the 273 days due July 2020, averaged 1.80915 percent.
In September auction resulted in an average yield of 1.74141 percent for the 91 days Instrument and 1.75085 percent for the 182 days with $4.6 billion chasing the $1.4 billion on offer. The previous 273 Treasury bill average yield was 2.00534 percent in August.
In October 2018, yields on the 182 days Treasury bill averaged 1.88 percent, then rose to 2.32 percent at the February 2019 auction and started to decline at the next auction in March.
Rates have fallen from 9.12 percent in December 2012 and 9.11 percent in March 2014 and are well below the lowest rates on record. The trend suggests that rates seem poised to fall further.

J$ gains moderate Jamaica’s inflation

Jamaica’s inflation rate eased 0.4 percent in September 2019 according to the All Jamaica Consumer Price Index recently released by the Statistical Institute of Jamaica (STATIN) as the Jamaican dollar appreciated from a low of J$138.1 to the US dollar well into late August.
The rise in the value of the Jamaica dollar in the above period would reduce prices downwards for imported items but mainly fuel that would lead to reduced gasoline prices airfares and electricity that have a major impact on inflation.
The rate is down from 0.8 percent in August and 1 percent in July but higher than the negative 0.1 percent in June. For the twelve months to September, inflation came out at 3.4 percent.
According to Statin, the movement for September “was mainly as a result of a 0.5 percent increase in the index for the heavily weighted division Food and Non-Alcoholic Beverages. Fluctuating prices in agricultural produce had a strong influence on the movement in the index for the class ‘Vegetables and Starchy Foods’ moving up by 1.3 percent.

Chart showing the effect of movement of the J$ & local inflation.

Other notable increases occurred for the following divisions: ‘Communication’ 6.9 percent resulting from higher price for communicative services, ‘Education’ 4.7 percent due to higher tuition fees for the new school year. ‘Recreation and Culture’ also increased by 1.7 percent from higher prices for textbooks. Additionally, the ‘Housing, Water, Electricity, Gas and Other Fuels’ division recorded a 0.3 percent increase, due primarily to higher electricity, water and sewage rates.” The overall increase in the inflation rate was tempered by a 1.0 percent fall in the index for the Transport division attributed to lower petrol prices and airfares. Notwithstanding the impact of the reasons for changes mentioned by Statin, a closer look at the movements of inflation and the exchange rate of the Jamaican dollar versus the US dollar shows the movement of the exchange rate having the most telling effect on inflation, as is shown by the chart of inflation and exchange movements.

Jamaica’s all season tourism

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Jamaica enjoying strong growth in stopover arrivals in 2019

A few decades ago, some hotels in Jamaica closed their doors during the summer months until December.
Much has changed since with the summer months last year pulling in more long-stay quests than the winter months.
Last year, the winter months of January to March saw 625,002 stopover visitors coming to Jamaica while 629,486 came in the April to June period. July 2018 had the most stopover arrivals to that point with 257,050 visitors with March, having 236,818 being the next highest. February 2018 with the least number of days had 193,575 visitors and was the lowest of the seven-month period.
Stopover visitor arrivals in 2019 March with 271,642 had the most just beating out July’s 270,462.
For 2019, the January to March period saw the industry recording a 13.3 percent increase over the same period in 2018 to reach 708,297 visitors and almost 26,000 more than the April to June 2019 period with total stopover arrivals of 682,386.
The less important cruise arrivals declined in 2019 to July with 979,648 passengers compared to 1,134,006 in 2018. While the first three months fell by 6.7 percent to 728,265 the second quarter declined by 23 percent to just 273,823 passengers, pushed by a 41 percent fall in May and 28 percent decline in June. In July the fall off was 25.5 percent with 77,560 arrivals versus 104,127 in 2018.

Jamaica’s inflation slows in August

Jamaica’s Inflation rate slipped to 0.8 percent in August from 0.9 percent in August 2018 and lower than the 1.1 percent recorded in July this year according to data released by the Statistical Institute of Jamaica.
The major contributors to the latest inflation data were food and non-alcoholic beverages, increasing 0.9 percent and Housing, Water, Electricity, Gas and other Fuels that climbed 1.7 percent due to higher electricity rates. The Transport sector rose 0.3 percent mainly due to higher prices for petrol and air travel.
For the year to date, inflation is up 3.3 percent and 2.6 percent for the fiscal year to date. The 2019 inflation rate is slightly ahead of the 2018 rates with the 2018 year to date inflation at 1.6 percent to August and the fiscal year to date 1.9 percent. Inflation for the last 12 months to August this year is 4.1 percent versus 3.9 percent for the same period in 2018.
The consumer price index measures the price level of consumer goods and purchases, and services from private individuals or households.

July business confidence rises

Bank of Jamaica’s (BOJ) Perception of Present and Future Business Conditions in the July 2019 survey shows rises for both indices but with businesses being more positive about the future of the economy than for the present.
The Present Business Conditions Index increased slightly to 125.5 relative to 124.9 recorded in the previous survey, the BOJ reports show. While the survey shows a slight increase, the results are below the 2019 peak of 128.9 recorded in March, just after the Jamaica Government announced a series of tax cuts in the budget presentation. The 2019 readings are well ahead of 97.5 recorded in June 2016. The Perception of Present Business Conditions index is not the best indicator of business conditions, as respondents’ answers are based on their interpretation of current events, rather than reflecting the real implications for future developments.
The Future Business Conditions Index, the better measure of business conditions, increased relatively sharply to 149.3 from 141.7 in the previous survey. The BOJ report stated, “the advance in the Present Business Conditions Index reflected an increase in the number of respondents of the view that conditions are about the same. The outturn for the Future Business Conditions Index mainly reflected an increase in the proportion of respondents who believe that conditions will be better.”
Future Business Conditions Index is still below the March 2019 peak of 153.5 and the all-time peak of 155.1 attained in December 2017. Since June 2016, the Future Business Conditions Index hit a low of 120.2 in July 2018.
While business condition surveys when released, are months behind, IC reviews of business sentiments in the past show that movements in the local stock market are the best indicators of the sentiments of the businesses and consumers.

BOJ cuts overnight rate to 0.5%

Bank of Jamaica cuts the overnight policy interest rate by 25 basis points to just 0.50 percent, effective Wednesday, 28 August 2019.
According to the central bank, the decision reflects the bank’s assessment that inflation is projected to average 4.3 percent over the next eight quarters, within the inflation target of 4 percent to 6 percent. Over the medium term, the forecast is for inflation to gradually approach the midpoint of the Bank’s target, albeit at a slower pace than previously expected. The inflation forecast is mainly predicated on the continued impact of low domestic demand conditions relative to the economy’s capacity, slower growth among Jamaica’s main trading partners and declines in international commodity prices. It also accounts for the impact of imminent changes in the fuel mix in the domestic energy sector on electricity rates.
As with previous reductions, the latest lowering of the policy rate is intended to stimulate a faster expansion in private sector credit, which should lead to higher economic activity.
Annual inflation to July 2019 reported by the Statistical Institute of Jamaica was 4.3 percent, up from 4.2 percent to June 2019 and 3.2 percent to July 2018. The marginal uptick in inflation mainly reflected the impact of increases in the prices of food items as well as an increase in electricity rates, BOJ stated. With this outturn, inflation remained within BOJ’s target of 4 percent to 6 percent for the third consecutive month.
Bank of Jamaica anticipates that inflation will decelerate to 3.7 percent in September 2019, as energy-related prices, fall before accelerating to 4.7 percent by December 2019 as food price inflation accelerates in the context of hot, dry weather conditions.

BOJ interest cuts overnight rate.

Inflation is expected to be supported by continued growth in domestic economic activity, partly in response to the lowering of the policy rate over the last eight quarters.
Over the March 2020 to June 2021 quarters, inflation is projected to remain low, in the range of 3 to 5 percent, mainly reflecting the impact of lower oil prices, more efficient domestic energy generation and low inflation among Jamaica’s main trading partners. The influence of these factors will, however, be offset by the impact of Bank of Jamaica’s past monetary accommodation.
Inflation is projected to return to the midpoint of the target, slowly over the ensuing three years. Of note, the projected trajectory of inflation is lower than previously forecasted. This reflects the Bank’s view that inflation expectations are lower than previously assessed and that the projected pace of expansion in domestic demand in the period will be slower due to headwinds from the global economy.

More taxes less cost keep GOJ in black

Nigel Clarke, Jamaica’s Minister of Finance

Data put out by Jamaica’s Ministry of Finance shows the government’s operating at a surplus with increased taxes and major cost reductions in two critical areas.
Information for the June quarter shows a surplus of $6.5 billion for the quarter against a planned deficit of a mere $58 million. Helping in achieving the positive outturn was near $4 billion in lower interest payments and the increased taxes and reduced expenditure of $3.6 billion on other areas of government operations. Capital expenditure saw $1.5 billion more spent than budget, while grants pulled in $3 billion less than planned.
Tax revenues brought in $128.7 billion, up 3.3 percent over budget and revenues from PAYE grew just one percent above budget, at $14.4 billion. Motor Vehicle license rose 7.7 percent above budget to reach $1 billion. GCT on local goods and services slipped 2.3 percent below budget to end at $24 billion but is up strongly on the total take for the 2018 first quarter. GCT on imports of $20.4 billion rose 2.7 percent above budget. Travel tax climbed 10.3 percent to $5 billion while betting, gaming and lottery taxes pulled in 28.6 percent more than in 2018 with $1.26 billion coming in for the June 2019 period.
The improvement is a continuation of healthy tax inflows for a number of years and is a sign of continued economic growth for the country.

Growth in 2019 tourist arrivals slowing

Jamaica had strong growth in tourism for winter 2019

Stopover arrivals growth to Jamaica slowed to 5.8 percent in May and June this year, compared to the hectic pace earlier in the year and 8 percent in May and June in 2018.
Growth of stopover arrivals was a robust 13.4 percent for the first four months of this year over the similar period, in 2018.
The country welcomed 238,888 stopover arrivals in June this year, an increase of 4.2 percent or 9,627 additional arrivals over the 229,261 recorded in June 2018. For the summer months of May and June, arrivals increased to 449,552 stopovers compared to 424,752 last year.
For the year to June, arrivals increased 11 percent, with 1,390,683 stopovers, 136,195 more than the 1,254,488 in 2018. Total stopover arrivals in 2018, grew 5.1 percent, over 2017 with to 2,472,727 compared to 2,352,915.
The United States remains Jamaica’s most important market, accounting for 68 percent of stopover arrivals in 2019, followed by Canada with 16 percent and the United Kingdom 8 percent. For the January to June period, the US market region has grown by 15.6 percent, with 945,761 visitors, 127,863 more compared to the 815,898 visiting during the same period in 2018.

Jamaica’s growth rate up 21%

The hotel and restaurant sector was a major contributor the 2019 Q1 growth.

The Jamaican economy is growing at a faster pace in 2019 than it did in the 2018 first quarter, data released by the Statistical Institute of Jamaica (STATIN) shows.
In the first quarter of 2017, growth was just 0.3 percent and for 2016 helped by election spending, it was up 0.9 percent. According to Statin the economy grew 21 percent faster than it did in the similar quarter of 2018, moving from a growth rate of just 1.4 percent to 1.7 percent in the 2019 March quarter. The stronger growth came about even as Statin reported that production in the Manufacturing sector declined.
The increase was positively impact by an 11.1 percent Mining and Quarrying and Hotels & Restaurants sector rising a strong 7.3 percent, the fastest pace since it grew 9 percent in the first quarter of 2008.
“This increase was due to growth in both the Services Industries and the Goods Producing Industries of 1.8 percent and 1.7 percent respectively,” Statin reported. “All industries within the Goods Producing industries recorded higher levels of output with the exception of the Manufacturing industry which decreased by 1.4 percent,” Statin went on to say. “Increased outputs were recorded for Agriculture,

The mining sector boost GDP growth strongly in Q1 2019.

Forestry & Fishing (0.3 percent), and Construction (3.4 percent). Growth in the Agriculture, Forestry and Fishing industry was largely due to higher output levels recorded in the Other Agricultural Crops sub-industry, which includes Animal Farming, Forestry and Fishing of 2.1 percent.
Growth was achieved in all eight (8) of the Services Industries: Electricity & Water Supply (1.9 percent) Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment (1.3 percent),Transport, Storage & Communication (1.2 percent), Finance & Insurance Services (2.5 percent), Real Estate, Renting & Business Activities 1.0 percent), Producers of Government Services (0.2 percent) and Other Services (1.8 percent).