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Jamaica’s business conditions to decline in 2020 – Bank of Jamaica survey

Business conditions in Jamaica will decline in the coming year according to a survey of business leaders by the Bank of Jamaica (BOJ).

The Bank of Jamaica in downtown Kingston, Jamaica (Photo: Jamaica Observer)

The Survey of Businesses’ Inflation Expectation for November 19, conducted by the Statistical Institute of Jamaica for the BOJ, showed that most of the senior executives polled expect inflation for the calendar year to increase and that the local currency will depreciate over the short to medium term.

The majority of the 326 respondents expect the inflation rate to increase from 4.7 per cent to 4.8 per cent for the year, with expected inflation to reach 5.0 per cent over the next 12 months. This is in comparison to 4.7 per cent for the current year and 4.9 per cent for the next 12 months for the survey conducted in October 2019.

“With regard to the financial sector, the majority of respondents expected that the Bank’s policy rate would be unchanged. Furthermore, responses from the financial sector revealed that 10.7 per cent of respondents expected the rate to be marginally higher.”

– Bank of Jamaica

When asked about their satisfaction regarding the way inflation was being addressed by the Government, the analysis shows there was a decline in the perception of businesses. “This was largely due to a decrease in the proportion of respondents who were “very satisfied” along with an increase in the proportion of respondents who were “neither satisfied or dissatisfied” with how inflation was being controlled,” the survey said.

What’s more, the survey of chief executive officers, managing directors and financial controllers suggest Jamaica’s dollar will depreciate by 2.6 per cent over the 3-month, 6-month and 12-month periods.

The survey polled responses from 326 CEO,s managing directors and financial controllers.

Most people surveyed expect that the BOJ’s policy rate to remain the same over the next three months, similar to the previous survey which had a rate of 0.50 per cent.  

“With regard to the financial sector, the majority of respondents expected that the Bank’s policy rate would be unchanged. Furthermore, responses from the financial sector revealed that 10.7 per cent of respondents expected the rate to be marginally higher. This represented a decrease relative to the October 2019 survey,” the BOJ said.

Overall, the Present Business Conditions Index dropped from 120.6 per cent to 111.3 per cent while The Future Business Conditions Index saw an even greater fall from 140.5 per cent to 123.6 per cent when compared to the previous survey. The reduced outturn reflects fewer businesses thinking conditions are “better” for both.

The survey showed that there was a decrease in the number of respondents who were “very satisfied” with how inflation was being controlled.

Production costs are expected to increase in the coming year, primarily due to increased utilities, stock replacement and fuels and transportation costs, while wages and salaries should remain relatively static.

The survey was conducted between October 21, 2019 and November 18, 2019 and is used by the Central Bank to assist in charting its policy decisions.