EPOC Press Statement – Quarterly Media Briefing

Kingston, Jamaica – 26 February 2019

The Economic Programme Oversight Committee (EPOC) met on February 15, 2019 and reviewed the latest available results for the period ending December 2018.

The fifth formal review mission by the IMF under the
current Precautionary Standby Arrangement (PSBA) is scheduled for the period
February 25 – March 8, 2019. This review mission assesses the performance of
the Government of Jamaica (GOJ) in meeting the targets for the end-December
2018 period, and to discuss the performance to date in meeting the structural
benchmarks and commitments under the programme.

Based on the preliminary results for performance to date
through the end of December 2018, the GOJ is on track to meet the targets for
the Quantitative Performance Criteria and indicative targets for the IMF PSBA,
with the exception of the inflation target which triggers a staff consultation
clause whereby the BOJ will consult with IMF Staff on the outlook for inflation
and the proposed policy response.

For the review period April to December 2018, the Fiscal
Performance continued its positive trend.

Tax
Revenues Outperform Budget

Revenue & Grants of $448.8b for the first nine months
of the fiscal year (April-December) exceeded the budgeted amount of $437.3b
(+2.6%). Tax Revenues of $388.7b outperformed IMF PSBA target of $360b and GOJ
1st Supplementary budget target of $378.1b.

Tax Revenues year over year increased by $35.6b (10.1%)
from $353.1b for the period April through December 2017 to $388.7b for the
comparable period in 2018.

Expenditures
behind Budget by $11.6b

Expenditure for the first nine months of the fiscal year
(April-December) was $11.6b below budget (-2.6%). Of this amount, Recurrent
Expenditure was $11.0b below budget (-2.8%), while Capital Expenditure was
$0.6b below budget (-1.3%).

Capital
Expenditure up 46.6% year over year

Capital Expenditure year over year increased by $14.4b from
$31.0b for April through December 2017, to $45.4b for the comparable period in
2018.This represents a 46.6% increase year over year.

Primary
Balance

As a result of the Revenue and Grants performance and the
under-expenditure for the first nine months of the fiscal year, the Primary
Balance of $107.7b exceeded the $68.0b IMF PSBA programme target and the GOJ’s
$89.0b 1st Supplementary Budget target for April-December 2018.

International
Reserves

Non-Borrowed Reserves as at the end of December 2018 stood
at US$2,522m, significantly exceeding the IMF PBSA Programme Target of US$2.2b,
while Net International Reserves stood at US$3,005m.

Inflation
dips to 2.4% in December 2018; triggers IMF Staff consultation clause

The 12-month point-to-point inflation rate at December 2018
was 2.4%, below Bank of Jamaica’s target of 4.0% to 6.0% and lower than the
same measure at December 2017 (5.2%).

In line with the Governance Process, Bank of Jamaica (BOJ)
will send a report to the Minister of Finance and the Public Service within 60
days on why the target was missed in December and proposed remedial actions, as
deemed necessary.

Foreign
Exchange Market

On 25 February 2019, the value of the Jamaican Dollar
vis-à-vis the US dollar was J$131.02= US$1.00, reflecting an appreciation of
1.90% ($2.54) for the Month to Date. This follows depreciation of 6.56% ($8.38)
for January 2019.

The appreciation in the value of the Jamaica Dollar for the
review period was influenced by: (1) the BOJ injecting liquidity of US$80m
through its B-FXITT flash operations as well as (2) low demand for US dollars
as end users anticipate lower rates.

The BOJ continues to use the transparent B-FXITT mechanism
to sell or buy USD when the market reflects a projected shortage or surplus
respectively. FX interventions are intended to address excess volatility and
disorderly market conditions.

PIOJ
estimated growth of 1.7% for October to December 2018

The PIOJ estimated a 4.2% increase in in the Goods
Producing industry and a 0.8% outturn in the Services sector. Mining and
Quarrying was estimated to have grown by 22.9%, Construction estimated at 3.5%
and Agriculture and Fishing estimated at 2.6%.

Employment
levels continue to increase

As reported by STATIN, the unemployment rate for October
2018 was 8.7%, a 1.8 percentage point decline compared to the rate of 10.5% for
October 2017. The employed Labour force was 1,219,700 which was 14,400 higher
than in October 2017.

BOJ reports that Private Sector Credit through Deposit
Taking Institutions (DTIs) Increases Year over Year.

Lending to the Private Sector by Deposit Taking
Institutions (DTIs) grew by 14.6% at November 2018; an acceleration relative to
the growth of 12.7% at November 2017. Lending to the productive sector by DTIs
reflected annual growth of 17.7% at November 2018 relative to 8.4% for the
corresponding period of 2017.

Inflation
continues decline to 2.3% for January 2019

The CPI declined by 0.2% in January 2019. The point to
point inflation was 2.3% which continues to be below the IMF Precautionary
Standby Arrangement (PSBA) inner band of 3.5% and the BOJ’s target of 4-6%.

BOJ
responds to missed inflation target by lowering policy Interest rates to 1.5%

On February 20, 2019 the Bank of Jamaica announced its
decision to lower its signal interest rate by 25 basis points to 1.50%. This
decision was driven by the continued out-turn of inflation below the BOJ target
of 4-6% and its forecast that inflation over the medium term in the context of
low core inflation “will fall below the target at various points”.

The BOJ’s decision to lower interest rates “is aimed at
increasing the rate of expansion in private sector credit and is not aimed at
influencing the exchange rate.”

BOJ
reduces Cash Reserve Requirement for Deposit Taking Institutions (DTIs)-March
1, 2019

The Cash Reserve Ratio for DTIs is to be reduced effective
March 1, 2019 from 12% to 9%. This reduction will release $16.8b to the DTIs,
which the BOJ states “will improve their ability to provide more credit to
households and businesses at lower rates and on better terms.”

The
Bank of Jamaica committed to further reductions in the cash reserve ratio over
the year

EPOC continues to be supportive of the BOJ’s accommodative
stance as it uses its monetary policy tools to stimulate private credit,
through lower interest rates and lower cash reserve ratios which should lead to
increased domestic demand and strengthening of the Jamaican Economy.

FX
Trading Platform to strengthen Market Infrastructure and Price Transparency

The Minister of Finance, Dr. Nigel Clarke, reiterated a GOJ
commitment under the IMF PBSA Programme for the implementation of a FX Trading
Platform by the end of 2019. This FX Platform will be integrated with the
existing payments and settlements systems and regulations will be issued by
September 2019.

EPOC is of the view that this will lead to greater
transparency and price discovery which could result in reduced volatility and
trading margins which would be a major positive for market participants.

Steady
upward Trajectory in Tax Revenues, Growth projections below 2% for 2019/20

The selected highlights of Fiscal Policy Paper of Budget
Estimates for FY2019/20 Issued February 14, 2019 are as follows:

Tax
Revenues are projected to increase by 7% from $537b in 2018/19 to $576b in
2019/20Capital
Expenditures will see a marginal increase from a projected $68.8b for 2018/19
to $72.1b in 2019/20The
Primary Balance which is projected to close Fiscal Year 2018/19 at $142.1b is
estimated to close the Fiscal Year 2019/20 at $150.9b

Debt
to GDP ratio is projected to fall to 96.4% at the end of the Fiscal Year
2018/19 and is projected to fall to 90.9% at the end of Fiscal Year 2019/20Net
International Reserves (NIR) is projected to close Fiscal Year 2018/19 at
US$2.914b and is estimated to increase to US$3.045b at the end of 2019/20The
inflation for 2019/20 is projected at 4.3%.GDP
growth is projected to be 1.8% for Fiscal Year 2018/19 but is projected to fall
to 1.5% in 2019/20.

Mining and Quarrying is projected to grow by 2% in 2019/20,
which is significantly down from the projected 27% growth for 2018/19 for this
industry.

This baseline forecast for GDP growth for 2019/20 is
impacted negatively by the assumption that production is likely to be disrupted
at the Alpart Plant for a total of 3 months due to the installation of various
pieces of equipment.

Despite the missed inflation target and growth level persisting below the 2% growth levels, the economy despite its continued challenges seems poised for growth in the medium term.

EPOC is of the view that the Economic Programme remains on
track.

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September 2024: Update on the GOJ Economic Reform Programme (ERP)

The EPOC met on September 2, 2024 to review the Fiscal and Monetary Quantitative Performance indicators under the Government of Jamaica’s Economic Reform Programme
The following were key highlights noted by EPOC:

Revenues and Grants for April to July 2024 outperformed budget while Expenditures were within budget
Inflation of 5.1% for July 2024 remains within the Bank’s target range
BOJ lowered its policy rate to 6.75%, marking the first reduction from since August 2019
Net International Reserves (NIR) totaling US$5.1B at end-July 2024 remain robust
Except for the fiscal balance, all targets and structural benchmarks for the third review under Jamaica’s Precautionary and Liquidity Line (PLL) and Resilience and Sustainability Facility (RSF) arrangements with the International Monetary Fund (IMF) were met

Communique-46-SEPTEMBER-2024

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May 2024: Update on the GOJ Economic Reform Programme (ERP)

Tax Revenues underperform, Inflation moves within BOJ target range, NIR hits historic highs
The EPOC met on April 12, 2024 to review the Fiscal and Monetary Quantitative Performance indicators under the Government of Jamaica’s Economic Reform Programme.
The following were key highlights noted by EPOC:

End-March 2024 Tax Revenues significantly underperformed budget
Inflation of 5.6% for March 2024 signals a return of the rate to the Bank’s target range
Net International Reserves (NIR) at historic levels of US$5.14B at end-March 2024
All indicative targets and structural benchmarks under the IMF Precautionary and Liquidity Line (PLL) and the Resilience and Sustainability Facility (RSF) at end-December 2023 were met.

Communique-45-DT-OBSERVER-MAY-2024-2

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December 2023: Update on the GOJ Economic Reform Programme (ERP)

Jamaican economy continues on a growth path; inflation dips into target range but remains a concern for the BOJ; BOJ maintains tight monetary policy stance
The EPOC met on November 17, 2023 to review the Fiscal and Monetary Quantitative Performance indicators under the Government of Jamaica’s Economic Reform Programme.
The following were key highlights noted by EPOC:

For the second consecutive month, the inflation rate (5.1% for October 2023) has remained within the BOJ’s target range but is projected to rise above the target between December 2023 and March 2025
For April-September 2023, Tax Revenues exceeded the Second Supplementary Estimates by $6.9B (1.8%) while total Expenditure was marginally in line with the budgeted estimates
Jamaica records a Current Account Surplus (CAS) of US$241M, marking the first surplus in over two decades
Net International Reserves (NIR) stood at US$4.6B at end-October 31, 2023 and remain more than adequate
As at end-June 2023, all indicative targets and structural benchmarks under the IMF Precautionary Liquidity Line (PLL) and the Resilience and Sustainability Facility (RSF) have been achieved
Real GDP was estimated to have grown by 1.9% for the July-September 2023 quarter.

Communique-44-DEC-2023

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July 2023: Update on the GOJ Economic Reform Programme (ERP)

Jamaican economy continues on a growth path; inflation remains a concern for the BOJ; monetary policy remains tight
The EPOC met on June 4, 2023 to review the Fiscal and Monetary Quantitative Performance indicators under the Government of Jamaica’s Economic Reform Programme.
The following were key highlights noted by EPOC:

Inflation rate continues to trend downwards, albeit ending May 2023 at 6.1%, just outside BOJ’s target range
For April-May 2023, Tax Revenues grow year over year by $18.7B (18.3%) and exceeds YTD targets by $10.5B (9.6%)
For April-May 2023, Total Expenditure grew by $30.7B (26.1%) year over year driven by Public Sector Compensation growth of $23.8B (52.8%)
Net International Reserves (NIR) of US$4.2B as at May 31, 2023 remain strong
Jamaica kicks off IMF programme strong, exceeding quantitative targets and meeting structuralbenchmarks
Real GDP grew by 4.2% for the January-March 2023 quarter and by 4.7% for FY2022/23
Real GDP has surpassed pre-COVID levels
Debt-to-GDP exceeds target of 79.7% to close FY2022/23 at 77.1% down from 94.2% for FY2021/22

Communique-43-DT-OBSERVER-JULY-2023

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March 2023: Update on the GOJ Economic Reform Programme (ERP)

The EPOC met on February 24, 2023 to review the Fiscal and Monetary Quantitative Performance indicators under the Government of Jamaica’s Economic Reform Programme. The following were key highlights noted by EPOC:

Inflation rate continues to trend downwards, ending February 2023 at 7.8% relative to 8.1% at January 2023
Tax Revenues outperformed the Third Supplemental budget
Wages and Salaries to GDP continue to breach the 9% fiscal rule and is projected to close the year at 11.4%
EPOC recommends a review of the GOJ Wages to GDP 9% fiscal rule as it continues to be breached
Net International Reserve of US$3.9B as at February 2023 remain strong
Real GDP growth of 3.4% was estimated for the October-December 2022 quarter, an indication that Real GDP has returned to pre-COVID levels and projected to close the Fiscal year at 5.1%
GOJ projects 1.6% GDP growth rate for 2023/24
Debt to GDP is projected to close the fiscal year at below 80% as Primary and Fiscal balances exceed targets
Debt to GDP is projected to fall to 74.2% in 2023/24

Communique-42-March-2023

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