Jamaica enjoyed a strong 10.4 percent growth amounting to US$17.2 million in net remittances in April 2016 to reach US$184 million compared to April 2015. The growth reflected an increase in gross remittance inflows buttressed by a slight contraction in remittance outflows.
Gross remittance inflows for the month were US$203 million, an increase of US$15.5 million or 8.3 percent versus the similar period last year. While the April’s increase climbed sharply over 2015, net inflows for the first 4 months of the year is up just 3.5 percent, reflecting swings in the rate of growth for various months, with January suffering a contraction of 6.4 percent and March rising by just 1.5 percent.
Net remittances for the first four months of 2016 were US$22 million or 3.5 percent above the 2015 period, to end at US$660 million, flowing from an increase in gross inflows, partially offset by an increase in outflows. Total inflows were US$740 million, an increase of US$25 million or 3.5 percent.
In 2015 total remittance inflows, amounted to US$2.23 billion or 3 percent ahead of the amount generated in 2014.
Jamaica’s remittances up 10%
Business confidence set to recover
Business confidence levels dipped in May this year, as measured by the Bank of Jamaica Perception of Present and Future Business Conditions survey and by the stock market movements. The local stock market has since rebounded and is close to its historic peak at Mid July, an indication that business confidence levels are set to rebound when measured in the summer months.
No new data is out from Jamaica’s central bank, of the latest levels. With the stock market having been rebounding, government fiscal program ahead of target and the Jamaica dollar settling down recently, the prospect of a rebound in survey numbers seems to be on the cards. Historical data indicate that the stock market is one of the best measure of business confidence levels, with the chart showing how closely the market index tracks the movement of future business confidence.
According to the survey findings, the perceptions of both present and future business conditions moderated compared to the record highs of the previous two surveys (see chart). Notably, the index of present business conditions fell 6 percent to 213.1 from the 226.1 attained in the previous survey. The index of future business conditions declined more slowly than the current measure by 2.6 percent from 171.5 in the previous survey to 167.1.
Both indices reflected declines in the proportion of respondents of the view that conditions were or will be “better.” In addition there were increases in the number of respondents indicating that conditions were or will be “worse.” There was, however, an increase in the proportion of respondents that indicated that conditions were or would be ‘about the same’ for both indices.
Huge increase in Government revenues
Government revenues jumped by nearly 6 percent over budget for the first two months of the fiscal year to May, while payments dropped sharply resulting in the fiscal deficit of just $4 billion for the two months, down by $11 billion projected.
Revenue in take for the two month period is just over $9.2 billion or 15 percent ahead of the similar period for 2015.
Tax revenues jumped 6 percent or $3.8 billion over forecast, flowing mainly as a result of an increase of, $530 million in withholding tax on interest, local GCT amounting $1.26 billion, stamp duty of nearly $500 million and GCT and special consumption tax on imports of $1.1 billion.
Interestingly, the increase is taking place with little input from the new taxes government implemented in May this year.
On the expenditure side, interest cost fell by $1.5 billion and normal housekeeping expenses is down by $3.4 billion while the wage bill moved up by $966 million. Capital spending was under, by $3.2 billion, with only $1.6 billion spent by May. Information, gleaned indicates that much of the under spending is due to a slow start to the fiscal year, with June spending expected to catch up.
The increase in revenues is in keeping with a trend seen in the first 9 months of 2015, when revenues were growing well ahead of forecast. Total revenues are up 21 percent or $5.9 billion ahead of the amount generated in April 2015 and 10 percent or $3.37 billion more in May this year, than for May 2015.
It early days yet, but if the trend on the revenue collection continues close to what is now being experienced, it would make it much easier for the government to meet some of the commitments they have, for 2017 onward.
Jamaica’s remittances up 7%
Remittance inflows into Jamaica for February this year, climbed 7.3 percent to US$180 million for an increase of US$12 million compared to the corresponding month in 2015, while net remittances totalled US$161 million, representing an increase of US$12 million or 8 percent.
The expansion in net remittances for the month is a result of the increase in gross remittances, which was partially offset by a marginal expansion in remittance outflows from US$18.7 million to US$19 million.
For the two months period, total remittance inflows were US$340 million, representing an increase of US$6 million or 1.9 percent, while net remittances grew by just US$2.6 million to US$299 million after accounting for outflows moving from US$37.6 million in 2015 to US$41.3 million this year. The increase in February comes against the background of a fall in inflows of 3.6 percent in January, over the same period in 2015.
Jamaica could lose some flows from Britain, with the pound having fallen from around the 1.50 level to the US dollar for a great part of 2015, to just over 1.30 now. For 2015, according to data from Jamaica’s central bank (Bank of Jamaica), remittances from the UK amounted to US$347 million, as such this year’s fall in the pound could cut inflows from the UK by US$25 to US$30 for 2016 and as much as US$50 million in a full year, if the rate remains depressed.
IMF predicts 1.7% growth for Jamaica
Growth is projected to increase over the medium term, the International Monetary Funds (IMF) is projecting for Jamaica.
According to the Fund in their review of Jamaica performance under the IMF agreement “Growth for Financial year 2016/17 is revised down to 1.7 percent, largely reflecting the slower-than-expected increase in investment. Agricultural recovery is expected to contribute to a third of the real growth for the fiscal year, in addition to a recovery in manufacturing and sustained growth in BPO, tourism, and trade. Over the medium term, growth is projected to gradually rise to around 2¾ percent, as large transportation and energy infrastructure projects come to fruition and planned structural reforms raise private investor confidence and investment.”
Prices up during May in Jamaica
Prices mostly rose in May resulting in Jamaica experiencing an inflation rate of 0.2 percent for the month over April this year with the calendar year to date figure still showing no signs of higher prices overall, with negative inflation of 1.4 percent, data from the Statistical Institute of Jamaica (STATIN) reveal.
According to STATIN, the main contributors to overall upward movement in May, were Food and Non-Alcoholic Beverages up by 0.1 percent, Housing, Water, Electricity, Gas and Other Fuels up by 0.6 percent and the Transport division advancing by 0.8 percent. The point-to-point movement, that is, inflation for the past year, is 2.1 percent.
“Mainly impacting the index for the division Food and Non-Alcoholic Beverages are increases of 0.1 percent and 0.3 percent in the index for the groups, Food and Non-Alcoholic Beverages respectively.
Petrol added to inflation in May
Other areas of price increase are, Alcoholic Beverages and Tobacco 0.1 percent, Clothing and Footwear 0.3 percent, Furnishings, Household Equipment and Routine Household Maintenance 0.3 percent, Health, 0.1 percent, Recreation and Culture 0.1 percent and Miscellaneous Goods and Services 0.2 percent. There were no increases for Education, Communication, Restaurants and Accommodation Services.
Bank of Jamaica cuts interest rate
BOJ sold US dollars into the system on Monday
The rate was last reduced from 5.50 percent to 5.25 on August 18, 2015.
According to the central bank “the adjustment to the signal rate reflects the Bank’s assessment that the inflation outlook for the fiscal year 2016/17 will continue to be favourable and is expected to be within the lower half of the 4.5 percent to 6.5 percent target range for the fiscal period. Although growth has been weaker than expected, macroeconomic indicators have been reflecting generally positive trends. Inflation expectations remain firmly anchored in single digits, international reserves are above adequacy levels, the current account of the balance of payments is projected to be at a sustainable level, private sector credit is expanding, market interest rates have been trending downwards and the fiscal accounts continue to be strong.”
The reduction follows falls in Treasury bill rates that are now just ahead of the pre adjusted CD rate.
TT$ drops 4.7% with US$ shortage
Jamaica is not the only country in the Caribbean undergoing exchange rate adjustment. Trinidad and Tobago that has had a long period of steady exchange rate versus the US dollar is now seeing its currency lose value.
At least one company, National Flour Mills speak of shortage of foreign currency to do their business.
While devaluation has been commonplace for some time in Jamaica, the country’s neighbor, Trinidad and Tobago who have had seen a steady exchange rate versus the US dollar for years, at around $6.30 has now seen a near 5 percent devaluation of their currency with the rate falling from $6.32 in October last year to $6.63 currently for a devaluation of 4.7 percent against the United States currency.
The rate could slip even more, with the price of oil on the world market below US$50 a barrel starving the country that is highly dependent on oil revenues to fuel its economy, coupled with high levels of inflation over a number of years while the exchange rate remained stable.
Jamaican dollar has lost close to 5 percent in its value this year against the United States dollar, taking the exchange rate over $125 to the US even as inflation for the year to date is negative. Since the start of 2015 the local dollar has fallen from $114.66 to the current rate of $125.43 a decline of 9.4 percent and beating the rate of inflation for the same period by 8.5 percent.
T-bills spurned by investors
Investors spurned the latest issues of treasury bills with two of the four offerings for the month being heavily under subscribed and with the yields rising, albeit modestly.
All four issues had offerings of $400 million each but while the 30 days instrument received bids of $474,943,600 and ended with a yield of 5.37 percent the same level as the previous issue, the 91 days received $508,470,400 at a yield that rose from 5.65 percent to 5.80 percent, the 181 days received just 366,081,700 with the yield rising from 5.82 percent to 5.91 percent and the nine months instrument saw just $167,987,400 and enjoyed an average yield of 6.414 percent.
The rates are slightly ahead of the Bank of Jamaica’s 30 days CD rate of 5.25 percent which has been in place since 2016. With inflation for the first four months of the year at negative 1.7 percent it seems that the central Bank’s inflation target of 5.5 percent is far too high and should be adjusted down and with it a lowering in the CD rate.
Remittances down in January
Remittances into Jamaica for January, this year declined compared the similar month in 2015, a report on remittance flows out of the country’s central bank shows.
Gross inflow for the month was US$6 million of or 3.6 percent off the intake in January 2015 to end up at US$160 million.
Remittance outflows amounted to US$22.4 million which was 18.7 percent higher than the $19 million that went out in the 2015 period. The combination of the inflows and increased outflows resulted in net total inflows of US$138 million, representing a decrease of US$9.5 million or 6.4 percent, relative to the corresponding period of 2015. The decline is the only January that there has been a decline from since inflows fell in 2009 below the intake for January 2008.
