Soft remittance flows to end at $3.4B in 2023

Remittance inflows into Jamaica fell 1.9 percent in September to U.S$284.4 million and 1.2 percent for the year to date to just under $2.53 billion, this marks the 6th month of decline in remittances for the year to date, data from jamaica’s central bank shows.
With three months to go before the end of 2023, the market seems on track to be close to this US$3.44 billion of total inflows in 2022, with the absolute shortfall in remittances to date of just US$31 million adrift of the 2022 intake to September. The 1.9 percent fall in September is far less than the 5.9 percent decline that occurred in August and a 5.8 percent fall in April.

Cooling inflation demands lower interest rates

Inflation cooled considerably over the past year in Jamaica, to 5.1 percent to October 2023, data just released by the Statistical Institute of Jamaica (STATIN) shows. The rate is down from 5.9 percent for the period this year to September 2023, and down from 9.9 percent for the October 2022 period.
Statin also stated that inflation for October came in at points 0.8 percent, sharply down from the same period last year at 1.5 percent. October’s inflation is worse than the 0.5 percent that occurred in September this year. But spike in oil prices would have played a big role in October inflation. The fall in oil price to the low $70 levels currently, is signalling that inflation in November is likely going to be moderate with the year to date inflation then heading for the low 4 percent range.
According to the report, inflation in October was driven primarily by the upward movement in the division of ‘Housing, Water, Electricity, Gas and Other Fuels’. The increase in the division’s index was mainly attributed to higher rates for electricity, water and sewage. In addition, ‘Food and Non-Alcoholic Beverages’ also contributed to the increase.
Point to point inflation is now well within the Bank of Jamaica’s mandated target range of 4-6 percent, but the fiscal year numbers which are the basis for their target could be much higher than the figure above. Regardless the central bank runs the risk of driving the economy into recession if they are not careful and move to ease interest rates fast.
Recent data from a large number of listed companies show sluggish revenues growth and lower profit for the September quarter compared with 2022 as well as the first half of 2023, added to this, tourist arrivals slowed considerably in recent months compared to the earlier part of the year and that industry has been the major driver of economic activity this year and added to that the construction sector has been in decline and could worsen.

Worst fall for remittances

Remittance inflows to Jamaica in August slipped by 5.9 percent or US$18 million, the worst monthly decline for 2023, with total inflows of US$289, down from US$307 in August 2022, data out of the Bank of Jamaica show. The decline beats the 5.8 percent decline in April, with a slippage then of US$17 million.
So far, January, March and May are the only months with positive inflows compared with 2022.
In a year of primarily monthly declines, inflows are down by 1.1 percent or US$26 million to US$2.24 billion to August from US$2.267 million for the first eight months last year and now seem likely to come in just below the US$3.44 billion total inflows for 2022.

Remittances to Jamaica slip

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Jamaica’s Central Bank in downtown Kingston

Remittance inflows to Jamaica in July 2023 amount to US$303 million and represent a decline of 0.09 percent or US$2.7 million in comparison to July 2022 and is the 4th month of decline for the year to date, according to data released by the country’s Central Bank.
For the January to July 2023 period, remittance inflows to Jamaica amount to US$1,952 million, representing a decline of 0.4 percent compared to January to July 2022 when US$1,959 came into the country. Notwithstanding the decline for the year to date, the country is on track to match total inflows in 2022 of US$3.44 billion barring any major negative developments.

Remittances tracking 2022 inflows

Remittance inflows to Jamaica for the first half of 2023 are marginally behind intakes for 2022 with $1.64 billion being taken in, 0.3 percent less than for the same period in 2022, with June slipping 0.7 percent to $286 million below the $288 million collected for June last year.
The data for the half year suggests that the total of US$3.44 billion collected in 2022 is likely to be within reach this year if the current trend continues. In 2019 gross remittance inflows were $2.4 billion, which is a billion dollars less than was collected in 2022.
According to the Bank of Jamaica, the entity that compiles the data, remittances from the USA account for 69.8 percent of total flows, down from 70.7 percent in June 2022. Other source countries with a notable share are Canada at 10.5 percent, followed by the UK and the Cayman Islands at 10.0 percent and 5.8 percent, respectively.

A 600% plunge in Unemployment in Jamaica

When the Jamaica unemployed fell to the lowest level on record to 4.5 percent in April this year, it was falling precipitously by more than six times from the levels that were at unhealthy and chronically high of 24 to just under 28 percent between 1977 and 1989.  

Jamaica’s record low unemployment at 4.5% in April 2023.

The April 2023 outcome is down from 6 percent in April last year and from 6.6 percent in July 2022, while the number of persons employed is at its highest level ever, with the total number of employed persons at 1.313 million in April this year. The highest level of employment before was 1.27 million in January 2020. Knowledgeable persons have expressed their views on the numbers, with one suggesting that Jamaica has always had a low level of unemployment. That is entirely at variance with the facts; see chart.
The country has only experienced rates below 15 percent for a few years, primarily after 2007.
There has also been some focus on the number of hours used to determine whether persons are included in the employed pool. What has not been acknowledged by critics of the low unemployment level is the many businesses finding it more difficult to recruit workers to employ, as well as the need to increase wages to retain those they have. Finding workers going forward is going to be a real challenge and one that will cause companies to look carefully at their operations to see where they can employ cost savings methods to deliver goods and services with minimal dislocations. If the economy continues to expand, it will result in workers coming in from overseas.
When Jamaicans start to pump gas for their vehicles, it will dawn on us that things have changed and that development is only a few years away.
Jamaica’s employment rate has been pushed by the considerable focus on tourism expansion and the advent and rapid expansion in the BPO sector that now employs around 5 percent of the workforce, with the numbers employed said to be over 60,000 and addition a sharp increase in construction activity for residential and commercial demand lifted employment in that area.
Data compiled by from the Bank of Jamaica, the World Bank and Statin show that unemployment averaged 25.8 percent between 1977-89. The rate fell in 1990 to 19.1 percent and 15.7 percent in 1992 and remained around 15 percent until 2006, then fell to 11.5 percent in 2007 and 11.3 percent in 2008 and 9.9 percent in 2009 before reversing back up to mid-teens up to 2015 and had slowly drifted down since with the exception of 2022 when it climbed to 10.7 following the economic fallout from the Covid19 pandemic.

Remittance inflows rise for Jamaica

Remittance inflows into Jamaica continue to track close to the 2022 flows, with a slight reduction year to date, but inflows for May 2023 rose 2.4 percent over last year after a US$7 million increase to US$290 million, data out of the country’s central bank show and that was well up on the $272 million pulled in during April this year.
Inflows for the year to date are down marginally by 0.2 percent to US$1.36 billion compared to the same period in 2022.
The continued strong inflows seem tied to the robust economic activity in the country’s primary source – the United States of America, which accounted for 70 percent of the inflows.

Mixed interest rate movements

Rates ended mixed on the latest issues of Government of Jamaica Treasury bills issued on Friday, June 9, following the auction of the two issues on Wednesday for $1.4 billion.
The 91 days issue for $700 million that matures in September this year resulted in an average yield of 7.86327 percent and the 182 days instrument has an average yield of 7.88671 percent.
The yield on the 182 days instrument is the lowest since August 2022 when it averaged 7.86, while the 91 days T-bill inched up from 7.82 percent in May but matched the rate in November last year and came against a background when the previous Bank of Jamaica CD average rate jumped to 9.30 percent, with only $21.36 billion going after the $22 billion the central bank offered.
The amounts of Treasury Bills applied for was $2.3 billion for the shorter term instrument and $3.06 billion for the other.

BOJ holds policy rate at 7%

Bank of Jamaica held its policy interest rate at 7 percent, citing concerns that there are likely to be temporary upticks in inflation above the target range during the June and September 2023 quarter, affected by recent increases in the cost of communication services, the national minimum wage, seasonally higher agricultural prices as well as pending increases in other regulated prices.
According to the Central Bank, annual inflation is projected to again be within the Bank’s inflation target range of 4 to 6 percent by the December 2023 quarter, but it noted that both core inflation and the consumer price indices are now within the 4-6 percent band at 5.7 and 5.8 percent up to April this year.
To continue underpinning inflation returning to the target range and to underwrite continued stability in the foreign exchange market, the Monetary Policy Committee (MPC) unanimously agreed to continue to hold the policy rate and maintain tight Jamaican dollar liquidity in the money market and to foster relative stability in the foreign exchange market.

Inflation rate drops in April

Inflation has finally returned to the band mandated by the Bank of Jamaica of 4 to 6 percent per annum, with the year over year rate now at 5.8 according to data released by the Statistical Institute of Jamaica (Statin.) and is down from 6.2 percent in March.
The dip in the point to point inflation below 6 percent was occasioned by a fall in the All-Jamaica Consumer Price Index (CPI) of 0.4 percent for April 2023 and was influenced mainly by a 4.2 percent fall in the index for the division ‘Housing, Water, Electricity, Gas and Other Fuels’. The movement in the division’s index was due to a reduction in the rates for electricity, which resulted in a 12.5 percent fall in the index for the group. There was also a decline in the index for the ‘Transport’ division, which moved down by 0.1 percent due mainly to reduced petrol and air travel costs. The inflation rate was, however, tempered by a 0.6 percent increase in the index for the heaviest weighted division ‘Food and Non-Alcoholic Beverages.
The inflation rate since November last year is now negative.