Jamaica’s creditworthiness is improving, Scotiabank’s economic units stated in the economic Executive Briefing on Jamaica. Fitch recently upgraded the country’s sovereign credit rating to “B” and assigned it a “stable” outlook Scotiabank Economic report says.
The revision reflects the successful implementation of the IMF program, strengthening external finances, and decreasing public debt the report stated. The report goes on to state, “Standard & Poor’s and Moody’s rate Jamaica in the “B” (stable outlook) and “Caa2” (positive outlook) categories, respectively. According to the IMF, the public sector debt reduction program is estimated to lower the general government debt-to-GDP ratio to below 115% in 2017 from 124.7% in 2015. Indeed, the buyback of PetroCaribe debt in August 2015 at a discounted face value lowered the country’s public debt ratio by 10 percentage points and will ease the external debt repayment burden.”
Scotia positive on Jamaica
Scotia sees J$130 to US$ in 2017
After losing nearly 30% of its value since 2012, the Jamaican dollar (JMD) is expected to maintain a defensive tone against the US dollar (USD).
The value of the JMD will continue to be affected by weaker sentiment towards emerging markets as the US Fed gradually tightens monetary conditions, as well as by investors’ perceptions regarding the implementation of the austerity program under the four-year Extended Fund Facility (EFF) loan agreement with the IMF, a recent report released by the economic units of Canadian Scotia bank stated recently.
“ We forecast a further depreciation in the JMD from a year-end rate of 120 in 2015 to around 125 this year and 130 in 2017 per USD. Net international reserves stood at US$2.26 billion in February, equivalent to over 5 months of import coverage” Scotiabank Economics Report stated recently.
Neither forecast would represent major moves in the value of the currency percentage wise. IC Insider.com data suggests that the currency may well remain around current levels for a prolonged period, or head to around 125 with inflation for 2016 looking like it will be less than for 2015, with no new major taxes expected. The tax break for persons earning less than $1.5 million could have a moderating impact on wage settlements and inflation as well.
GOJ in black with $6b collection
Jamaica’s Ministry of Finance newest office building
The Primary surplus ended at $3.5 billion below budget at $80 billion down from $83.5 originally planned, but the difference may be accounted for by the reduction in the target agreed by the IMF.
Elsewhere a $3 billion increase on income and profit tax above budget to February this year, helped the government to meet the deficit target set for the elven months of the fiscal year that ends in March. While the income and profits tax were ahead of target, taxes on production and consumption and on imports delivered $1.5 billion less than targeted and bauxite levy was down by $2.4 billion, no doubt caught up in the dispute and bankruptcy proceedings with Miranda Bauxite Company. Grants were also off by $3 billion from the amount budgeted.
The capital budgeted expenditure that is usually underspent in past years has been fully used up to the end of February but the government incurred less on debt servicing with lower interest cost of $3 billion for the elven months period.The month with the largest inflows of funds, March is yet to be fully compiled and not yet released. Those numbers will be important for the government going into the new fiscal year, as it would indicate what is the likely capacity for increased spending, for the year ahead. What is known is that interest cost should fall in the year as Treasury bill rates to which a large portion of the national debt is tied have been declining and this should lead to lower cost in this area.
Record remittances for 2015
Jamaica garnered just 3.2 percent or US$69 million in remittance inflows in 2015 bring total inflows for the calendar year to US$2.226 billion, after accounting for outflows of US$233 net remittances for the 2015 totaled US$1.99 billion, for a net increase of US$48 million over 2014.
For December 2015, remittance inflows amounted to US$211 million, an increase of a mere US$6 million or 2.9 percent relative to the corresponding month of the previous year. Net remittances totalled US$189 million, an increase of US$4.4 million or 2.4 per cent, relative to the corresponding period of 2014
Remittance inflows are the highest in Jamaica’s history, having hit US$2.157 billion in 2014, up from US$2.065 billion in 2013 and US$2.43 billion in 2012.
Jamaica’s record remittances
Jamaica continued to enjoy positive inflows of foreign exchange from overseas in the area of remittances. For the first eleven months of 2015, total remittance inflows were US$2.015 billion, an increase of US$63 million or 3.2 percent over the similar period in 2014.
The 2015 take is the first time that the country has crossed the $2 billion mark by the end of November in any year.
Total remittance outflows which amounted $206.5 million in 2014, ended at $210.4 million for the first eleven months of 2015 and resulted in net remittances for the year to November 2015 of US$1.80 billion, an increase of US$59 million or 3.4 percent relative to the corresponding period of 2014.
In addition to remittances, other transfers into the country were almost on par with that of 2014 up to October, with inflows of US$115 million compared with $117 million in 2014. For all of 2014 other transfers amounted to $145 million.
Interest rates drop
Interest rates payable on the latest round of Treasury bill instrument offered by the Government of Jamaica, declined but the 28 days instrument plummeted by 50 basis points to 5.54 percent from 6.04 percent out come at the January auction.
The 182 days instrument fell by 21 basis points to 5.73 percent but the 91 days instrument climbed back above the 6 percent mark to end at 6 percent, up from 5.94 percent in January.
Treasury bill Interest rates are coming from a high of 9.11 percent on the 182 days instrument, in March 2014 and has been falling since. The latest rates are the lowest since the early 1980s.
The issues were for a total of $400 million each, with the 28 days instrument attracting $569,799,800, the 91 days one pulling in only $418,580,000 and the 182 days instrument attracting $671,724,700.
Jamaica’s unemployment falls
Jamaica’s Unemployment Rate fell by 0.7 percentage point in towards the end of September but remains at a stubborn 13.5 percent of persons said to be in the workforce, a decrease from to 14.2 percent at the same time in 2014.
Over the period, the unemployment rate for males declined from 9.9 percent to 9.3 percent and for females from 19.4 percent to 18.5 percent.
The number of persons Unemployed in September 2015 was 178,600, a decrease of 7,600 compared with 186,200 in September 2014. “The largest increase in the number of employed persons occurred in the industry group ‘Hotels and Restaurants Services’ and ‘Real Estate, Renting & Business Activities’ with a total of 23,700 persons,” the Statistical Institute of Jamaica (STATIN) said.
A total of 22,600 more workers were employed compared with September 2014 bringing the total to 1,146,600 employed persons in September 2015.
Government capital spend jumps $3.7b
Peter Phillips – Minister of Finance
Tax revenues continue to be on a positive path, with $6.6 billion over budget but grants are below by $3.1 billion resulting in revenues surplus of $2.5 billion. Government over spent on wages in the tune of $2.3 billion taking the total spend to $126.6 billion but interest cost continues to be lower than forecast by almost $5 billion at $91 billion. Spending on other expenses was below forecast by $3 billion. The overall deficit was in line with forecast, at $14.7 billion and the primary surplus was nearly a billion more than planned at $66 billion.
Trade deficit continued to fall in 2015
Jamaica’s merchandise trade deficit for 2015 continues to improve with the period to October showing a decline to US$3.1 billion, 12.6 percent or US$449 million less than the US$3.56 billion in the comparable 2014 period.
Imports stood at US$4.17 billion, a decrease of 13 percent amounting US$627 million, while earnings from exports amounted to US$1.054 billion, a decrease of 14.5 percent or US$179 million, compared to the similar 2014 period.
The main contributors to this overall decline in imports were Mineral Fuels that fell by US$668 million or 40 percent to US$1 billion in the 2015 period. “The reduction was due to lower volumes of crude oil and processed fuels as well as the fall in the prices on the international market’” the Statistical Institute of Jamaica (STATIN) stated in their release of the figures.
Traditional Domestic Exports – accounted for 66.2 percent of total domestic exports during the 2015 review period with the inflows being flat with that of 2014 at US$674 million. “Non-Traditional Domestic Exports earned US$344 million to October 2015, reflecting a 31.6 percent or US$159 million fall from 2014 as all sub-groups decreased,” STATIN stated in their release of the figures.
At the end of September imports in 2015 declined by US$581 to US$3.79 billion. Earnings from exports amounted to US$970 million, a decrease of 13 percent or US$145 million compared to the similar 2014 period leading to a narrowing of the merchandise trade deficit to September to US$2.82 billion, a fall of 13.4 percent.
T-Bill rate slide continues
Interest rates on the 91 and 182 days Treasury bill instruments fell in the latest auction of the short-term government fund raising issues. Rates on the 28 days instrument auctioned on January 13, rose as the amount chasing the $400 million on offer fell below the offered amount with $391,812,700 applied for, with the rate rising from 5.97% to 6.04%. The 91 days instrument saw a slight drop in the rate below 6 percent for the second consecutive month with an average rate of 5.94%, a fall from 5.96% with $636,369,700 chasing the amount of $400 million on offer and the 182 days instrument fell from 6.04% to 5.94% with applications amounting to $872,369,200 for the $400 million on offer.