Washington – The International Monetary Fund (IMF) on Wednesday said that Jamaican economy was now recovering strongly supported by sound policy frameworks and policies prioritising macroeconomic stability.
The IMF Executive Board, which has concluded the Article IV consultation with Jamaica, said that over the past few years, the island has been buffeted by a difficult global environment from the coronavirus (COVID-19) pandemic, the war in Ukraine, and the ongoing tightening of global financial conditions.
“As COVID waned, stopover flight arrivals had rebounded to pre-crisis levels, and 2022 real GDP (gross domestic product) growth is expected to be around four per cent,” the Washington-based financial institution said.
It said pushed by global factors, in particular, the impact of the war in Ukraine on commodity prices, inflation has risen above the Central Bank’s target band but is expected to decline during the course of 2023.
“High commodity prices have resulted in an increase in the current account deficit. However, international reserves remain at healthy levels. The financial system is well capitalized and liquid.”
The IMF said that the outlook points to a continued recovery in activity and inflation falling back within the Bank of Jamaica’s target range by end-2023. Nonetheless, global risks remain high.
The IMF warned that the war in Ukraine may push commodity prices higher, a stronger-than-envisaged tightening of global financial conditions may curb capital flows and reduce remittances, and new COVID variants could disrupt tourism and trade.
It said Jamaica’s response to recent shocks has been well designed.
“The fiscal policy response to COVID was nimble, supporting the economy in 2020 but then quickly resuming a downward path for the debt as the impact of the pandemic faded. Similarly, the response to the upward surge in fuel and food prices was to allow for full pass through while providing targeted support to the poor within the existing fiscal envelope.”
It said that the Bank of Jamaica has followed a data dependent tightening of monetary policy to counter the inflationary impulse arising from the rapid recovery in demand and increases in global prices.
The IMF said that these policies have struck the right balance in responding to shocks, protecting the vulnerable, countering inflationary pressures, and further securing debt sustainability. (CMC)