KINGSTON: Governor of the Bank of Jamaica (BoJ), Brian Wynter, has lauded the government’s economic reform program, (ERP) saying it has helped keep inflation to a low despite significant economic shocks over the past two years.
According to Wynter, inflation remains at eight per cent and has trended down between September 2013 and the end of June 2014.
He told the BoJ’s quarterly media briefing that this has resulted from the transformation taking place under the ERP that aims to spur economic growth, contribute to reducing Jamaica’s public debt, maintain the country’s balance of payments schedule and enhance its global market competitiveness.
Wynter said that headline inflation stood at eight per cent at the end of June 2014, down from 8.8 per cent from the corresponding period last year.
“Not least of the shocks that occurred during the period was the 13.3 per cent and 10.8 per cent depreciation in the exchange rate in the last two fiscal years, respectively,” he said. “Also, last year there was the 25 per cent increase in bus and taxi fares.”
Wynter noted that historically, such a combination of shocks would have been enough to “send inflation spiraling into double-digit territory. However, this did not happen”.
He said the strong fiscal conditions created by the reform program were among some of the factors which accounted for this resilience, resulting in producers and retailers unable to pass on to consumers the impact of some of these shocks, especially the exchange rate depreciation.
“In the productive sector, especially in agriculture, which has a significant impact on inflation, there were significant improvements in efficiency and output, with the advent of supply-side initiatives, such as the agro parks,” he said.
Wynter emphasized that maintaining the current stance of fiscal discipline will continue to temper the emergence of excess domestic demand and thereby deepen the economy’s resilience.
He said that the preservation of economic stability, together with the maintenance of recent gains in external price competitiveness, will allow the productive sector to grow faster, led by exports and competitive import substitution.
“I think in addition to these, from an inflation perspective, are the expectations of the public, which represent a critical factor in managing inflation in a market economy like Jamaica’s,” he said. “If we are going to achieve our objectives, we have to pay careful attention to these expectations.”