Governor of the Bank of Jamaica (BOJ), Richard Byles says Jamaica is not currently at risk of a recession.

Speaking in a BOJ quarterly press briefing on Tuesday, Byles said that the country’s economy still has significant room for growth, especially in the tourism and bauxite industries.

“My understanding is that the capacity that tourism is at now is approximately 70 percent of pre-pandemic capacity, so we have some way to go in that external area of the economy,” he said.

“We also have a major alumina plant (JAMALCO) that has been down, that should come back in about June of this year, so I see those two sectors having a very positive impact on growth throughout the rest of the year,” he added.

Byles was addressing concerns that continued monetary tightening could cause a recession in the Jamaican economy.

“The tightening that we’re doing should not restrain achievement of the targeted growth of the 2-4 percent target for the (financial) year 2022/2023. I don’t see a lot of danger in that,” he said.

The BOJ last week announced its decision to increase the monetary policy rate by 50 basis points to 5 percent per annum, in a bid to stem rising inflation.

According to the Statistical Institute of Jamaica, inflation for the 12 months up to April (point-to-point inflation) was 11.8 percent, well outside of the BOJ’s target range of 4-6 percent. The inflation rate is the rate at which prices increase over time, resulting in the fall in the purchasing value of money.

The BOJ has now increased policy rates by 450 basis points over the past several months.

Inflation to peak by June

Byles noted that the inflation rate is expected to peak between 12-15 percent by June, as the country continues to grapple with the effects of the COVID-19 pandemic as well as the effects of the Russia/Ukraine war.

He said that the conflict has led to a significant increase in commodity prices, namely oil, wheat and grains.

“After carefully considering all the risks around this outlook, it is our view that the Bank of Jamaica should continue its programme of monetary tightening until we have seen the projected turn in inflation material,” he added.

Deputy Governor Robert Stennett added that, all things being equal, the Bank foresees inflation falling below 10 percent by early 2023 and returning to the desired target rate by June 2023.