COVID-19 continues to affect activity in domestic banking sector

The novel coronavirus pandemic continues to affect activity in the local banking sector and overall financing in Jamaica, based on the latest assessment coming out of the Bank of Jamaica (BOJ).

In its latest Quarterly Monetary Policy Report for February 2021, the BOJ observed a deceleration in the growth in deposits, which reflected a slowdown in the growth in demand and savings deposits to 17.3 per cent and 17.1 per cent, respectively. This was relative to the growth of 22.1 per cent and 17.8 per cent in September 2020.

In addition, time deposits declined by 14.2 per cent for the period relative to a growth of 20.7 per cent in September 2020. The BOJ reports that “the growth in deposits may have been related to increased efforts by deposit-taking institutions to attract more depositors.”


Loan growth has remained fairly resilient, although the pace of growth has moderated. It remained above what was expected given the sharp fallout in economic activity, bolstered by continued demand for loans by businesses for working capital needs.

Since the start of the pandemic, the BOJ has implemented a number of initiatives aimed at supporting Jamaican dollar liquidity, including reducing the cash reserve requirement, implementing a Government of Jamaica/BOJ bond-buying programme, reactivating the BOJ Intermediation Facility, a special Repo facility for Credit Unions and also the Occasional Term Repurchase Operation.

The central bank’s liquidity support in both Jamaican and US dollars has been substantial and unprecedented, equivalent to more than 12.0 per cent of Gross Domestic Product.

Given the heightened challenges associated with the coronavirus outbreak, BOJ has maintained an accommodative monetary policy stance, aimed at encouraging and supporting a speedy economic recovery.

At the same time, it has continued to be focused on ensuring that inflation remains low, stable and predictable within the target of 4.0 to 6.0 per cent. BOJ Governor Richard Byles declared at his quarterly press briefing last Friday that, “The Bank is also prepared to take all necessary actions to ensure that Jamaica’s financial system remains sound and well capitalised.”


Broad money, which includes notes and coins as well as bank deposits, treasury bills, which are referred to as ‘near money’ grew at an annual rate of 14.6 per cent at November 2020, a deceleration relative to the growth at September 2020. The BOJ says the expansion in broad money at November 2020 reflected growth of 11.9 per cent in local currency deposits, a deceleration relative to the 19.7 per cent recorded at end-September 2020.

In the meantime, Jamaica’s annualised inflation has climbed in 2020 and more so over the December quarter. Annual inflation accelerated to 5.2 per cent at December 2020, up from 4.9 per cent at September 2020.

This out-turn mainly reflected the impact of increases in agricultural food prices and energy costs. Over the next eight quarters, inflation is projected to average 5.0 per cent (lower than the average rate of 5.3 per cent previously projected).

The BOJ anticipates that inflation will rise in the range 4.0 to 6.0 per cent in March 2021, decelerate in the range of 4.0 to 5.0 per cent in June 2021 and then accelerate in the range 4.5 to 5.5 per cent in September 2021.

However, inflation is projected to remain within the BOJ’s inflation target of 4.0 per cent to 6.0 per cent over the medium term.