BOJ says economy signalling moderate recovery

Senior staff reporter

Friday, August 31, 2018

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The Bank of Jamaica (BOJ) has predicted a “modest acceleration” in real GDP (gross domestic product) growth over the next two years.

Giving his Quarterly Monetary Policy Report (QMPR) at the BOJ, downtown Kingston on Wednesday, Governor Brian Wynter said that the economy continues to show signs of moderate recovery, with GDP growth estimated to have accelerated in the June quarter of 2018.

He said that the economy is estimated to have expanded in the range of one to two per cent in the June 2018 quarter, above the 0.1 per cent growth recorded in the June 2017 quarter, and the 1.4 per cent expansion recorded for the March 2018 quarter.

“This accelerated pace of growth predominantly reflected an improvement in net external demand, as well as increases in investment and some growth in private consumption,” Wynter noted.

“The Bank of Jamaica projects a modest acceleration in real GDP growth over the next two years, but with economic activity remaining somewhat below the economy's capacity,” he told journalists.

“Real GDP growth is projected to expand at an average quarterly growth rate of 1.5 per cent to 2.5 per cent over the next eight quarters. This forecast continues to be supported by strong foreign demand, particularly from the United States. However, fiscal consolidation is expected to continue to have a restraining influence on domestic demand,” Wynter added.

The central bank governor noted that labour market conditions also continue to reflect improvement.

“The unemployment rate declined to 9.7 per cent at April 2018 from 12.2 per cent a year earlier. The fall in the unemployment rate reflected annual growth of 14,700 new jobs, combined with a decline in the labour force,” Wynter said.

“The Bank of Jamaica expects further improvements in labour market conditions over the next two years, but these improvements are not expected to present a major risk to inflation,” he added.

Wynter pointed out that, overall, Jamaica's macroeconomic indicators continue to reflect stability.

“Jamaica's net international reserves are healthy and the current account of the balance of payments, while projected to widen, will remain at sustainable levels,” he stated.

“Market interest rates are at record lows and fiscal performance remains strong. In this environment, [the] Bank of Jamaica is able to continue with an accommodative policy stance in support of expanded output and job creation, which will return inflation to the bank's target of 4.0 to 6.0 per cent,” he added.

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