World Bank and CDB funds swell NIR

Net International Reserves surged 10 percent in March with a rise of US$303 to US$3.32 billion from US$3.016 billion at the end of February this year.
The buildup comes against a huge selloff of US dollars by dealers in the market between January and March, but the bulk of the increase did not come from normal inflows, information provided to this publication by Bank of Jamaica (BOJ) indicates. BOJ, in response to enquiry as to the source for the increase, states “the growth of approximately US$303 million in the NIR for the month of March 2021 was mainly influenced by government-related receipts of approximately US$217 million; of which, US$175 million represented multilateral loan inflows from the World Bank and the CDB. The remainder of the inflows were received from authorised dealers and Cambios, under the Bank’s Surrender Arrangement.”
Estimated Reserves represents 53.65 weeks of Goods Imports and 38.71 weeks of Goods & Services Imports. At the end of December, the reserves were $3.13 billion but fell by $148 million in January to $2.98 billion and then increased by marginally to the close of February.

The boom continues

Net remittance inflows for January this year jumped a massive 39 percent or US$63 million above the January 2020 inflows to US$224.4 million, data from Bank of Jamaica shows.
The sharp increase follows from the strong rise seen since May last year when inflows grew 41.6 percent, with the remaining months of the year increasing over thirty percent, except November that grew by 19 percent. For January this year, gross remittance inflows grew 32.7 percent or US$59.4 million to US$241 million. The trends suggest that the country could see earnings from this are exceeding US$3 billion for the first time, having grossed US$2.9 billion in 2020 and increased by US$500 million or 21 percent. According to data out of Jamaica’s central bank from 2013 up to 2019, remittance inflows have grown by an average of US$57 million per annum or 3%. The year with the highest increase was 2014 when a four percent rise delivered provided the country with a $92 million increased inflows and the year with the lowest increase was 2017 with an increase of just $14 million for a one percent rise.

Bank of Jamaica sees contraction & growth

Bank of Jamaica is forecasting a contraction in the economy in the range of 10 to 12 percent in 2020/21 fiscal year before partially recovering with growth in the range of 4 to 8 percent in the 2022 fiscal year to March.

BOJ interest holds overnight rate.

“A projected decline in real GDP for the March 2021 quarter is expected to be mainly reflected in Hotels & Restaurants, Transport, Storage & Communication and Other Services,” the central bank states. “The overall decline for the quarter, which is expected to be smaller than the contractions of the previous three quarters, is largely based on the adverse, albeit receding, impact of the global COVID-19 pandemic on travel and entertainment activities,” the bank’s release stated. The Bank’s current assessment suggests that the risks to the GDP forecast are balanced.
Monetary Policy
“While the impact of the Covid-19 virus has recently led to an increase in the stringency of measures in Jamaica to control its spread, there remains optimism about future GDP growth as vaccination programmes have commenced both locally and globally. Bank of Jamaica has maintained an accommodative monetary policy stance aimed at supporting a speedy economic recovery once this crisis passes. Bank of Jamaica remains committed to ensuring that inflation remains low and stable, within its target and, at the same time, is prepared to take all necessary actions to ensure that Jamaica’s financial system remains sound”, the release went on to state.
“The Bank intends to maintain this monetary policy stance until there are clear signs that economic activity in Jamaica is returning to pre-COVID-19 levels.” Against this background, the central bank has held the policy rate at the historic low level of 0.50 percent based on its assessment that inflation will generally continue to remain within the target of 4 to 6 percent over the next two years. The bank’s accommodative monetary policy posture is also aimed at supporting a recovery in economic activity in Jamaica, a release from the bank states.

Remittances jump 21% or US$500m in 2020

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Remittance inflows to Jamaica is up a strong 21 percent for 2020, with inflows jumping US$499.4 million to a record US$2.905 billion for January to December 2020 period, with the United States contributing US$386 million of the increase, data out of Bank of Jamaica shows.
The USA accounted for $1.69 billion of total inflows while the United Kingdom provided US$271 million. up by $34 million, Canada delivered US$52 million more than in 2019 after landing US$257 million in 2020. Contributions from the Cayman Islands, Jamaica’s fourth largest contributor to the country’s remittances, were virtually flat year over year, with US$145 million of inflows in 2020 versus US$142 million in 2019.
In the first two months of the year, gross inflows rose 9 percent and 8 percent, respectively, but fell 9 percent in March and 10 percent in April, compared with the same periods in 2019. In May, inflows rose 16 percent but jumped sharply by 42 percent in June, to record the highest growth for the year with inflows of $275 million. The other months of the year grew in the 30 percent range, except for November that increased by 19 percent.
Inflows for December grew 35 percent to record the highest monthly inflow for the year at US$301 million. July followed with US$293 million, increasing 37 percent over the 2019 period and August was next with US$280 million with an increase of 31 percent over 2019.

Sharp drop in January visitor arrivals

Stopover visitor arrivals to Jamaica fell 80.7 percent in January 2021 to just 43,831, a decrease of 183,369 compared to 227,200 recorded in the same month in 2020. The January numbers are well below arrivals in December last year with 90,164 stopovers that fell 68 percent with 190,951 fewer arrivals than the 281,115 recorded in December 2019.
Stopover arrivals from the United States fell 73 percent in January 2021, with 38,500 arrivals than the 143,460 arrivals in January 2020, with all US marketing regions recording decreases. Arrivals from the Canadian market dipped 93 percent, with just 3,274, down 42,608 from 45,922 visitors in January 2020. Visitor arrivals from the Caribbean region were down 79.5 percent to 1,070 compared to 5,217 in January 2019, while Latin American arrivals fell 89 percent with 565 stopovers compared to 5,219 in January 2020. Just a sprinkling of arrivals came from the United Kingdom and Europe in 2021.
While the numbers were down, there was some good news as the lent of stay was up sharply by 60 percent over 2020, with Non‐ Resident Jamaicans jumping 65 percent. The increased length of stay suggests that individual visitor spend could be close to twice what it was in 2020.
According to data from the Jamaica Tourist Board, “the average length of stay of Foreign National arrivals in January 2021 was 13.8 nights, compared to 8.6 nights in January 2020. The average length of stay in hotels was 7.9 nights in January 2021, compared to 6.4 nights in January 2020. The average length of stay of Non‐Resident Jamaican arrivals in January 2021 was 27.9 nights, compared to 17 in January 2020. The average length of stay in hotels in January 2021 was 9.8 nights, compared to 7.3 nights in January 2020.”
Data out of Aeroportuario del Pacifico suggests that arrivals for February could be worse than in January with an 82 percent fall in arrivals through Sangster International Airport and 75 through Normal Manley compared to 2020, with the total arrival numbers being well down from January
Looking forward, word out of the industry is that bookings are in the 70 to 80 percent region for the summer months as the vaccine is rolled out over the United States Jamaica’s largest market for visitors.

Investment 2021 – economic recovery

The Jamaican economy grew 8.3 percent in the September quarter over the June quarter, with construction rising 7 percent over 2019 as signs of recovery from the highly depressed June quarter takes hold. This trend should continue as the tourism sector picks up the pace of recovery from a virtual lockdown between March and June.

The Hampshire Apartments complex built by Guardian Life.

With construction being the star performing sector for the September quarter, continued growth in this area is expected to continue into 2021 as new road construction, the building of houses and hotels continue. The country is short of factory and warehouse space; these areas could add to growth in 2021 and beyond.
As the hotel sector gradually picks up pace, the drag that the sector has on the rest of the economy should decline, as such other sectors serving the industry should also see improvements. Some of the sectors are transportation, manufacturing, agriculture, water, electricity and banking.
In all probability, the first quarter of this year is set to show a sharp fall in visitor arrivals compared to last that saw just over 574,000 stopover arrivals, with January and February at full capacity with 463,000 visitors but there were no visitors on April or May and just over 7,000 in June. The recent trend suggests that barring unforeseen developments, the 2021 June quarter numbers should show an encouraging out turn, indicating that the recovery continues apace. Visitor arrival numbers were the highest in November since the reopening, with just under 50,000 stopover visitors, down 76 percent from the 203,000 arrivals in 2019. That beats October with 45,000, which is ahead of July and August with over 41,000 stopovers. December final numbers are not yet in, but preliminary numbers put arrivals to December 28 at an encouraging 98,000 arrivals. The numbers should reach 110,000 by the end of the month or 39 percent of the 281,000 arrivals in December 2019. The trend since reopening in June is for a near gradual monthly percentage-wise improvement.
Rebound in tourism will increase the supply of foreign exchange to the market and hopefully, lend to greater stability of the rate even as the central bank rebuilds the Net International reserves.
The BPO sector seems set to grow, with employment stated to be moving from 40,000 to 50,000 during the year. Late last year, the president of the Global Services Association of Jamaica, Gloria Henry, told the Observer that the sector had rebounded to the point where it now employs some 39,000 people.
In reciting developments in the BPO industry, the Jamaica Observer newspaper reported recently the following: “According to Henry, in the Montego Bay Free Zone, where she operates, the information technology outsourcing portfolio has grown by 12.77 percent and the aim is to grow by 66 percent this year. Henry pointed out that the BPO industry leaders had started 2020 with a great deal of enthusiasm and were ready to implement projects in a number of areas to boost employment to 50,000.”
“We have navigated uncertainty very well and now with resilience, we are advancing towards the future,” said Henry as she indicated that five new BPO sites are scheduled to be launch in the first quarter of this year.”
Areas of the local economy that have social distancing restrictions will continue to be under pressure with reduced business activity. Areas such as live entertainment and, by extension, transportation will find it hard to recover fully in 2021.
Balance of trade data up to September, reported by the Statin, shows a sharp fall in the country’s import bill resulted in a billion-dollar reduction while exports declined by a much smaller amount, leading to a sharp improvement in the trade balance.
The government will be collecting more revenues as the economy gradually opens up and some areas of expenditure, such as support for the fall out of the Coronavirus, will be reduced.
Al in all, things are looking much better for a strong recovery in the overall economy for 2021, but it is unlikely to fully recover until 2022.
Under such subdued economic activity, interest rates should continue to remain low, but the unemployment rate that rose sharply in 2020 will gradually fall during the year.
Against the above development, the local stock market should deliver positive results in 2021 and real estate values should continue to increase.

Jamaica’s NIR continues to rise

Net International Reserves (NIR) US$69 to close out November at US$2,963 up from US$2,893 in October. Jamaica’s NIR had a big jump of US$146 million in October from US$2.75 billion at the end of September.
Gross reserves rose by $73 million to $3.93 billion that includes US$970 million due to the International Monetary Fund. The October increase was the first major rise in net reserves for 2020. In March, the NIR rose to US$3.24 billion from US$3.13 billion, slipped to US$2.9 billion in May and ended July at a low of US$2.76 billion. The NIR now represents 38 weeks of goods and service imports, the Central Bank states.

Jamaica’s NIR jumps US$146m

Jamaica’s Net International Reserves jumped US$146 million in October to reach US$2.89 billion. The net reserves balance is coming from US$2.75 billion at the end of September.
Gross reserves rose by $146 million to $3.86 billion, including US$966 million due to the International Monetary Fund. The October increase is the first major rise in net reserves for 2020. In March, the NIR rose to US$3.24 billion from US$3.13 billion. By May, it slipped to US$2.9 billion and ended July at US$2.76 billion.
The improvement in the NIR comes against the background of foreign exchange Canbio dealers buying US$424 million from the public and selling $373 million in October as Authorized Dealers bought US$628 million and sold $668 million. Cambios and Authorized Dealers must surrender around 10 percent of all foreign exchange funds purchased to the central bank.

Jamaica’s Inflation stays low

Inflation in Jamaica for the first five months of 2020 remained extremely low, with the rate for May, coming in at 0.1 percent following April’s increase of just 0.2 percent, leading the year-to-date inflation rate at negative 0.4 percent.
Inflation over the past twelve months came out at 4.2 percent, with the period between July and November rising by exactly 4.2 percent, mostly due to a hike in the exchange rate of the Jamaican dollar versus the US dollar.
The May movement resulted mainly from a 1.1 percent increase in the heavily weighted Food and Non-Alcoholic Beverages division, according to a release from the Statistical Institute of Jamaica due to higher prices for agricultural produce, with a 2.3 percent rise. The division of Housing, Water, Electricity, Gas and Other Fuels increased 1.5 percent due mainly to electricity rates, which resulted in a 5.6 percent upward movement in the index for the group.
The index for the Education division fell 22.1 percent, primarily due to a decrease in tuition fees for the summer term and the Transport division index fell 0.3 percent, with lower prices for petrol contributed to this decline.

Jamaica’s inflation is tamed

Inflation in Jamaica is tamed. At least that is what data out of the Statistical Institute of Jamaica (STATIN) is suggesting, with negative inflation for the first four months of the year. 
According to the latest data on the Consumer Price Index (CPI), the inflation rate for April 2020 was 0.2 percent. The increase for April comes on the heels of low price increases from December last year, leading to a rise of 0.5 percent in the CPI index followed by January, with a negative price movement of 1.1 percent. February ended, with an increase of 0.7 percent, while March had a decline of 0.3 percent and with the April fall, the year to date movement came out at negative 0.5 percent.
The inflation rate for April is not directly comparable to the previous periods, but whatever difference there maybe is unlikely to be material. Statin updated the basket of goods and services used in the compilation of the index. Accordingly, the products and services included in the new CPI basket and the weights associated with each item have changed based on a 2017 Household Expenditure Survey. The difference between the old and new weighting is not substantial, with Food and Non-Alcoholic Beverages weighting of 37.4 percent previously, is now down to 35.8 percent. The group of Housing, Water, Electricity, Gas & Other Fuels is up to 17.8 percent from 12.8 percent previously. Transport is now at 11.2 percent versus 12.8 percent in the old basket. Recreation, Sports & Culture is at 5 percent compared to 3.4 percent in the previous measure. The only other change of note was the areas of Insurance & Financial Services that is now 1.1 percent. Previously it was grouped with Personal Care, Social Protection & Miscellaneous Goods & Services that amounted to 8.4 percent of the overall basket, with the new weighting for the new category, down to 5 percent.
According to STATIN, the reduction in the GCT rate, from 16.5 percent to 15 percent, impacted the inflation rate for April 2020. The ‘Food and Non-Alcoholic Beverages’ recorded an increase in its index of 0.3 percent. The inflation rate for the division ‘Housing, Water and Electricity’ was 0.2 percent due to a rise of 3.1 percent in the index for the group ‘Water Supply and Miscellaneous Services Relating to the Dwelling.’ The Transport division declined by 0.5 percent and was mainly attributable to the reduction in the costs of petrol.