Jamaica’s economy looking great for 2023

January 4, 2023 by


The Jamaican economy could grow by more than 6 percent in 2022, with continued growth in tourism and the Alcoa Alumina plant back in production in late August and could lift the December quarter growth above the 5.9 percent that Statin reported for the September quarter. The strong second half year growth should carry over into 2023, coming from an average increase of 5.73 percent for the period up to September and will be boosted by the expected continued strong resurgence of the tourism sector in 2023, barring unforeseen adverse developments, along with the impact of production from the reopening of the Jamalco Alumina plant that will add quite a bit to growth going into the first half of 2023.

Mining to contribute to GDP gains in 2023

Inflation is still not entirely under control yet, but it peaked in 2021, with the average for 2022 running close to the upper end of the central bank’s target of 4 to 6 percent. Developments that should help decrease the rate include world oil prices that have fallen substantially from the over $US120 experienced after the Ukraine war started and are now around US$80 a barrel. Prices of some other commodities are reduced and others could follow as a push of interest rates by several developed countries is set to tighten economic activities and trim demand. A tighter labour market, locally, could put upward pressure on wages and prices, but the tighter monetary policy from last year could hold prices down for a while.
Growth is not only expected from the above two areas. Assuming fair weather conditions, Agriculture, the star performer in the economy for several years, should continue its contribution in 2023. The sector will be helped by growth in tourism that feeds off the industry. The BPO sector seems poised to continue to add to growth as well as the construction sector, with continued growth in housing, road construction and the need for factories and warehousing space. There may well be a lull in the sector with the two south coast roads coming to completion in 2023: the Harbour View to Portland leg and the May Pen to Williamsfield leg of Highway 2000. The Montego Bay perimeter road should take over but may not fill the gap. This may not happen until the Montego Bay to Ocho Rios dualisation commences and is well on the way.
Why is tourism so important? Data shows that for the first quarter in 2022, stopover arrivals were 28 percent below arrivals for 2019, with the June quarter off by 3.3 percent, but September to November increased an average of 12 percent, which means that the first quarter in 2023 could see a 50 percent increase over 2019 and much more over 2022 in the first half on 2022.
Tourist arrivals into Jamaica are now running at record levels since August 2022. Data shows the country enjoying four consecutive months of arrivals exceeding similar months in 2019, the previous best period. Airport passenger movements through the Sangster Airport are up an average of 12 percent for the September to November period.

Growth in tourism is expected to be big in 2023

If the recent trend continues, it would mean that stopover arrivals should be in the order of 3 million next year, up from 2,680,920 in 2019 and would exceed those in 2022 by a solid 20 percent, with the winter months enjoying much higher levels of growth as shown above.
The strong rebound in tourism traffic in the first half of the year, compared with 2022, will contribute to above average GDP growth in the first half but will also result in a significant jump in revenues and profits for some companies and the government. This will have significant implications for the foreign exchange market with significantly increased flows, especially in the year’s first half. This development could also impact interest rates as BOJ may no longer have to lend much support to the local currency using high interest rates.
ICinsider.com don’t see interest moving higher and most likely will start to decline before midyear, with inflation within reach of the BOJ target of 4-6 percent in 2022 and with interest rates seeming to peak at 8.46 percent from April 2022 and remaining at the 8 percent level since based on 182 days Treasury bills.

Jamaica’s labour market has tightened and could pressure inflation in 2023.

Unemployment at 6.6 percent in July is expected to fall in 2023 towards the 5 percent region as more workers will be needed to man the economic expansion. This could mean wage increases could rise above normal to retain or attract new workers.
But all the above is good news for the private sector overall, that should see increasing demand for goods and services.
The banking sector showed loans growing at an annual pace of 12 percent up to September 2022, data from the Bank of Jamaica shows up to $1,096 billion, but increased loan rates may be negatively affecting some areas. With what could be a year of reducing interest rates engineered by BOJ, there could be even faster loan growth in 2023 than in 2022.
Remittances in 2022 appear they will fall short of the US$3.5 billion generated in 2021 and could come in at just over $3.4 billion for the year, reaching $2.84 billion to October. It may again slip marginally in 2023 since the big surge that took it from $2.4 billion in 2019 to the $3.5 billion level.
Net International Reserves. Jamaica’s Net International Reserves are in a healthy position with a jump of $75 million to $3.85 billion in November, data released by the Bank of Jamaica shows, an improvement over October at $3.77 billion. This year’s November balance is at the highest monthly balance for 2022 but is down US$150 million from the end of December last year with a net of $4 billion. Data from the Bank of Jamaica shows a US$100 million growth to Mid December 2022 that would push the net to around US$3.95, just shy of US$4 billion. Daily trades in the forex market after mid-December suggest a continued buildup of the reserves that should push it over the US$4 billion mark by the end of 2022, with the exchange rate for the Jamaica dollar appreciating 152 to the US dollar at the end of the year.

Road construction could slow growth in the sector in 2023

With the significant rebound in tourism, a resurgence in the Alumina sector and relatively stable remittances and BPO sectors, the country should enjoy record foreign exchange inflows in 2023.
Developments on the foreign exchange front could result in greater stability in the exchange rate for the local dollar. Investors should not be too surprised if there is some revaluation, especially in the first half.
The entertainment and transportation sectors seem poised to get a shot in the arm and benefit from the rebound in tourism, increased employment in the country and the general buoyancy in the wider economy.
The present government will be in power for three years at the end of August, but the last public opinion polls indicate a huge lead over the opposition party; with such a lead, the government is in the driver’s seat as to when elections will be called. But the opposition party could start revving up their machinery, so there could be a fair bit of noise to contend with. Local government elections are due in 2023 and barring some significant negative development these elections appear as if they will proceed as planned. If the opposition does well in these elections, it could result in the political heat being turned up a notch or two. If they don’t things will quiet down as the odds favour the government going the full term.
The above are positive developments but investors cannot ignore the impact that the war in Ukraine has had and could have going forward as well as concerns about the covid19 problems in China and how that could affect the world economies.

Reports to follow – Interest rates and the stock market. Outlook for stocks in 2023. Top 15 stocks. Stocks to watch in 2023.

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Jamaica GDP set to gain in 2020

February 23, 2020 by

Economic growth for Jamaica is expected to remain positive in 2020 following increases in 2019, even as the closure of Alpart acts as a drag on the economic growth rate in the first half of the year.
Jamaica will see steady growth with improvements in several areas during the year, with increased output for manufacturing, tourism, finances and other service sectors such as BPO and entertainment. The continuation of major road construction projects and many new buildings going up in the country will also aid the continuation of economic growth during the year.
Growth in stopover arrivals bounced to 7.6 percent in the December quarter up from a slightly slower summer months with gains of 4.5 percent, 2019 finished with an overall increase of 6.5 percent in stopover arrivals and bettered the 4.6 percent increase in 2018 over 2017. The increase in 2019 suggests a very strong demand for the Jamaican product. Increased demand for the product provides room for greater revenues per room as hotels do not have to do a deep discount of rates as they did in the early part of the last decade. The sector should continue to grow around 7 to 10 percent for the coming year and bring in addition inflows around US$400 million over 2020. It could do even more with the strong demand for rooms that could see hotels getting average rates that are higher than in 2019.
Concerns regarding the coronavirus are worth watching. If the spread in the west is more broad-based than it currently the case, it could negatively affect visitor arrival numbers to Jamaica.
Data out of Statin indicates a 4.9 percent increased output in the manufacturing sector for the September quarter, helped by gains in PetroJam production. That is faster than the July quarter, with growth of 3.2 percent and the first quarter growth with negative 1.3 percent following a 2.4 percent increase in the December 2018 quarter. The trend is positive for the manufacturing sector and augurs well for a good increase in 2020. Continued growth in loan financing and increasing interest of companies seeking fresh long-term capital through the capital market are big positives for the business sector in 2020 and beyond. The Manufacturing sector’s use of borrowed funds, excluding cement, was consistent with 20 percent increased borrowing in 2019 and 2018.
An important thrust in Jamaica’s economic development is the increasing number of companies raising long-term capital and listing on the Jamaica Stock Exchange. Increased long-term capital is an important move in getting greater productivity and production of goods and services out of local businesses that will help greater economic growth in the current year and beyond. Increased listings provide investors with viable opportunities to invest capital long term and be an integral part of the wealth creation in society. During 2019, there were several new listings on the Jamaica Stock Exchange. The exchange is forecasting 20 new listings in 2020 based on information provided by stockbrokers. The country will see the majority of companies seeking to list, raising fresh capital for business upgrading and expansion.
Growth in the construction sector will pick up, with the start of the Kingston to Port Antonio road construction and demand continues in the BPO sector that will stimulate the need for more space while adding to employment. Data out of the Bank of Jamaica shows a sharp rise in lending to the sector with an increase of 37 percent over the amount lent in 2018 and well ahead of the 27 increase in 2018 over 2017. The increase in 2019 suggests a further rise in growth in the sector, which should continue into 2020.
The new Old Harbor power plant commenced operation on December 17 and uses natural gas that is much more efficient than the oil-powered plant that was 50 years old and was highly inefficient. The South Jamaica Power Centre plant will provide a more reliable and efficient source of electricity and will result in fewer power disruptions and lower electricity cost as the new plant will use less fuel, fewer workers and requires lower maintenance than the old one, that will be closed in early 2020. With capital expenditure of US$300 million, some of the lower operating costs will be eaten up by interest and depreciation costs. JPS quarterly financial gave a glimpse of what to expect from the switch over with a 10 percent drop in fuel cost for the quarter even as the official switch over took place in mid-December.
The Foreign exchange market went through a number of changes as the central bank reduced the compulsory take from the market from 25 percent down to 20 percent for dealers and 15 percent for Cambios. In effect, the central bank bought no funds from the market through its weekly intervention tool and had no scheduled sale to the market. About four bouts of strong demand resulted in BOJ intervening by selling funds to the market. Notwithstanding, the interventions, the central bank ended the year with the NIR rising from US$3.005 billion at the end of December 2018 to US$3,16 billion after the NIR sank to US$2.95 billion in July.
Over the course of 2019, the exchange rate moved from $127.72 to US$1 at the end of 2018 to end 2019 at J$132.58 to US$1, after it reached its lowest level of J$141.89 to the US dollar on November. The NIR movement for 2019 suggests that the market is in a fairly balanced position. The country has periods when demand and supplies are higher than at other times and the two may not coincide thus creating some disquiet. There are other times when capital flows can impact the market positively or negatively. Unexpected capital flows can create a serious temporary imbalance in the system and may warrant BOJ’s intervention as occurred on a number of occasions over the last twelve months.

Growth in tourism expected in 2020

Money Market rates have been down and “This decline was also related to the increased supply of  liquid assets during the quarter, given the maturity of GOJ bonds over the period.” Interest rates have been generally trending downwards from April of 2019, following sharp falls in 2018.
Spike in the exchange rate of the Jamaican dollar to the US dollar in the last quarter of the year put added pressure on prices and pushed inflation rate for the year to 6.2 percent, well above the 4.6 percent for the last 12 months to November 2019. Inflation for January dropped sharply by 1.1 percent as the FX rate impact was not present with the Jamaican dollar appreciated. Movements of the local currency accounted for a large part of increased inflation in 2019. The natural level of inflation is in the two to three percent range. The inflation rate should move back to more moderate levels in 2020 than it ended in 2019.
Government normal revenues up to November were running 7.5 percent ahead of the $373 billion intakes forecasted, with inflows at $400 billion to December 2019. This increase is after the government removed or reduced taxes at the start of the 2020 fiscal year with no new taxes levied. The preliminary guideline for the 2021 fiscal year, is for increased expenditure amounting to $18 billion in non-interest expenditure, but that is likely to be well below a probably $30 billion increase in normal revenues. With interest cost on government debt set to fall below that of the 2020 fiscal year, following the sharp fall in interest rates during 2019. The government will have room to increase spending in an election year. There is likely to be increased in capital spending, to be well ahead of the $75 billion projected for 2020, the Ministry of Finance instructions suggest for fiscal 2021.
Unemployment rates continue to fall, with the October 2019 unemployment rate down to 7.2 percent, the lowest on record. Labour Market conditions are projected to continue improving for the next eight quarters, the country’s central bank contends “the expected improvement reflects employment growth in manufacturing, finance & insurance, and business process outsourcing.” The Statistical Institute of Jamaica data shows the number of unemployed dropped to 96,700 persons in October with the number employed rising to 1.248 million persons. Based on the trend seen over the last three years, the unemployment rate should drop a possible one-percentage-point in 2020 compared to 2019 putting the unemployment around 6 to 6.5 percent. What is important about this improvement is the increase in the number of employed persons that will lead to increased demand in the economy, helping to stimulate increased growth levels.
Crime continues to be a major negative on the country acting as additional taxes on the wider economy, unfortunately, this major negative will continue to be present for some time to come.

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Jamaican economy throwing up goodies

August 3, 2017 by

The Jamaican economy seems to be humming along pretty well, based on a number of critical measures that are available as well a physical evidence seen elsewhere.
There seems to be increased traffic around the corporate area at various times of the day, even when school is closed, thus reducing much of the normal peak hours traffic. Information from the Tourism sector is that visitor arrivals have climbed sharply since the winter months. There is strong evidence of increased construction activities with buildings be constructed across the length and breathe of Kingston and elsewhere in the country for commercial and residential purposes.
An examination of government’s statistical data is confirming some of these developments. Corporate taxes are up 33 percent over 2016 for the first 3 months of the fiscal year, an indication of higher sales and profit being generated. Education tax is running 7.7 percent ahead of projections and 13 percent above last year’s intake. Contractors levy is up over 2016 by 27.5 percent ahead of forecast, to reach $391 million and some 33 percent ahead of the intake for 2016 of $293 million, a good indicator of the health of the construction sector.
Traditional Exports are holding their own but with a slight fall in earnings for January to April 2017 of 1.5 per cent or US$3.4 million below the comparable 2016 period to US$216 million, but Non–Traditional Exports in the same period grew 36.2 percent or US$51 million above the US$140.9 million earned in the 2016 to reach US$192 million. Traditional exports should get a boost in the second half of the year with the resumption of alumina production at Alpart. Another critical indicator of increased health of the local economy is the second largest number of persons employed within a one year period of 35,500, for the twelve months to March 2017, only bettered by increased employment of 40,500 more persons between March 2015 and 2016,

The Hampshire Apartments complex being built by Guardian Life.

this number could have be swollen by persons employed due to the general elections that were held in February and staid on until sometime after. The 2017 numbers of newly employed, compares favourably with 2007 with 36,500 newly employed, 2006 with 41,900, 2005 with 35,500, but well below the 72,700 newly employed between April 2002 and 2003. Bank credit has expanded to one of the fastest pace for some time with an increase of 17 percent to $495.759 for banks excluding that was not so clarified in 2016. The growth is well over the approximately 4 percent inflation over the period.
Of course, business confidence is at record levels, as investors pump more investments into the local stock market, driving it to new record highs on the last day of July, with increases expected in the months ahead.
Recent data in the forex market shows it generating strong net inflows with the local currency enjoying some revaluation after a slight fall earlier in the year.

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Jamaican economy grew 0.4% in 2014

April 1, 2015 by

Building under construction in Montego Bay contributed to economic growth in 2014

Building under construction in Montego Bay contributed to economic growth in 2014

The Jamaican economy eked out growth of 0.4 percent in 2014 compared to the previous year, according to preliminary data released by the Statistical Institute of Jamaica (Statin). Growth of 1.75 percent took place in the first half of the year with negative growth in the latter half.
For the year Statin said that there was a 0.6 percent increase in the output of the Services industries while the Goods Producing industries declined by 0.1 percent. Growth last year was the second year of increased output for the economy with very moderate growth for 2013 around 0.2 percent. The figures will undergo at least two sets of revision before they are final as such the figures could be increased or reduced based on new data that may become available.
The Jamaican economy, grew by 1.6 percent in the first quarter of 2014, over the similar period in 2013. In the second quarter, growth accelerated to 1.9 percent, but a combination of drought conditions and negative impact of Chick v illness as well as closure of the oil refinery severely affected growth in the second half of the year, but more so in the third quarter. The economy declined by 1.4 percent in the third quarter of 2014 compared to the similar quarter of 2013 and growth in “the final quarter of the year resulted in 0.4 percent negative growth compared with the same period in 2013,” Statin said.
For the final quarter of 2014 the reduction in output was due mainly to a 3.9 per cent decline in the Goods Producing industries. The Services industries however, recorded an increase of 0.8 per cent, Statin stated.

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Jamaica’s Economy grows 1.8% in Q2

October 1, 2014 by

Agriculture was the star performer in Jamaica's growth in the second quarter

Agriculture was the star performer in Jamaica’s growth in the second quarter

The Jamaican economy grew by 1.8 percent in the second quarter of 2014, compared to the similar quarter of 2013, the Statistical Institute of Jamaica (Statin) reported. The second quarter growth rate, is slightly better than the 1.6 percent growth in this year’s first quarter.
The Statin report goes on to state, this performance reflects an improvement of 6.3 percent in the Goods Producing industries and a 0.5 percent increase in the Services industries.In the June quarter, Agriculture, Forestry & Fishing grew 16.6 percent, Manufacture 4.1 percent and Construction 1.2 percent. Mining & Quarrying industry declined by 0.4 percent.
Manufacture benefited from a 111.9 percent increase in the production of sugar and a 26.1 percent growth in petroleum refining. Higher output levels in Construction resulted mainly from an increase in expenditure on road work activities, including the continued work on the North-South leg of Highway 2000. Lower production levels in the Mining &Quarrying industry was due to a fall in alumina production, resulting from the stoppage of activities at one of the alumina refining plant. However, crude bauxite production increased by 13.3 percent.
Increased output was recorded for all industries within the Services industries with the exception of the Producers of Government Services, down 0.2 percent and Electricity & Water Supply, down 1.6 percent. Higher output levels were recorded for; Hotels & Restaurants 2.3 percent, Other Services 1.1 percent, Transport, Storage & Communication 1 percent, Real Estate, Renting & Business Activities 0.6 percent. The sharp jump in sugar production in the second which is not in line with increased production with the overall 2014 sugar crop, meant that growth in the first quarter would have been negatively affected by a late take off of the cane crop in 2014 which benefited the second quarter.

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Statin confirms 1.6% growth in Q1

July 3, 2014 by

Jamaicaneconomy280x150The Jamaican economy grew by 1.6 percent in the first quarter of this year over the similar 2013 period but it is lower than the growth in the December quarter and only just moves the country ahead of where it was in 2012 as the latest growth figure places the country at 0.50 percent ahead of the first quarter of 2012. This is the third straight quarter that the economy is said to have grown. Statin previously confirmed that the Jamaican economy grew 1.8 percent in last year’s fourth quarter, 0.5 percent in the third quarter of 2013 when compared to the similar quarter of 2012 versus a decline of 0.1 per cent in the second quarter and declined by 1.3 per cent in the first quarter of 2013.
In contributing the overall growth in 2014, Goods producing industries grew by 5.5 percent and Services industries by 0.3 percent. Agriculture, Forestry & Fishing grew by 17.7 percent, Mining & Quarrying 8.5 percent and Construction 1.2 percent. Manufacture declined by 1.2 percent.
“Higher output levels in Construction was impacted largely by continued expansion in hotels and increased spending on work under the Jamaica Development Infrastructure programme”, Statin stated.
“Higher output was recorded for all industries within the Service sector with the exception of the Government Services which declined by 0.2 percent. Higher output was recorded for Transport, Storage & Communication (0.7 percent), Real Estate, Renting and Business Activities (0.6 percent), Electricity & Water Supply (0.5 percent), Other Services (0.4 percent), Hotels & Restaurants and Finance & Insurance Services (0.2 percent) and Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment grew by (0.1 percent)”, the report stated.

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