BOJ expects COVID-19 to be contained by June
The Bank of Jamaica (BOJ) says it expects that the novel coronavirus (COVID-19) will be largely contained by June 2020.
The forecast was announced by BOJ Governor Richard Byles, who presented on the bank’s latest Quarterly Monetary Policy Report (QMPR) via video conference on Wednesday.
Byles said there are signs that the measures being executed to contain the public health threat are starting to work, as daily infection rates appear to be stabilizing in several countries.
With these caveats, BOJ’s baseline forecast assumes that the virus will be largely contained by end-June 2020 and that the global economy will gradually re-open thereafter.
In the context of these assumptions, the BOJ projects that the Jamaican economy will contract in the range four to seven per cent for FY2020/21.
Specifically, it is forecasting a contraction of 5.1 per cent for this fiscal year.
The BOJ is therefore anticipating a recovery of 2.5 – 5.5 per cent in FY2021/22.
Bank of Jamaica Governor Richard Byles
The projected contraction in FY2020/21 is broad-based but will be mainly reflected in Hotels and Restaurants, Mining, Wholesale & Retail, Transport, Storage and Communication and Other Services, the BOJ noted.
“A big chunk of that recovery is [from] tourism and that is outside of our control. We can do the best we can to stay COVID free and to processes to allow people to enter our country and enjoy a vacation,” the BOJ governor reasoned.
Even so, this is dependent on the policies of the countries from which the tourists are coming.
“In other words, if you leave the United States and come here and want to re-enter the United States, what’s the protocol there,” Byles said.
Other industries, such as Manufacturing and Distribution, which have been impacted by the measures instituted locally, will also see a decline.
Moreover, these drastic changes in the pattern of economic activity in Jamaica and abroad will be reflected in the balance of payments, according to Byles.
The current account deficit of the balance of payments is projected to worsen by more than five percentage points of GDP in FY2020/21 to 7.5 per cent from the 2.3 per cent estimated for FY2019/20.
This worsening mainly reflects the impact of the sudden stop in tourist arrivals and the slowdown in remittance inflows.
In contrast, the merchandise trade deficit is projected to improve due to a decline in imports, particularly fuel, in the context of lower oil prices.
The fall in the income of Jamaicans as well as a decline in FDI-related projects are also expected to constrain the importation of non-fuel consumer goods, raw materials and capital goods.
What’s more, the central bank expects that the unemployment rate will rise above nine per cent to the 7.3 per cent that was recorded in January.
“We are looking at between nine and 12 per cent, the PIOJ, which focuses very keenly will give more detail on this,” Deputy Governor Dr Wayne Robinson said.
Robinson also said the bank does not expect Jamaica’s economy to return to pre-COVID-19 growth levels until the end of this fiscal year.
The BOJ cited World Health Organisation (WHO) research that says that pandemics of respiratory disease follow a certain progression.
The BOJ also said that not every country has reacted to the coronavirus pandemic in the same way as there are complex geographic, demographic and political factors at play that may make one country more susceptible to a surge in cases than another.
It said countries were able to effectively contain the 2003 severe acute respiratory syndrome (SARS) outbreak in approximately six months as there were no new cases reported by July 2003.
This outbreak, the central bank analysts noted, was contained by means of syndromic surveillance, prompt isolation of patients, strict enforcement of quarantine of all contacts, and emergence of new influenza viruses.