The Jamaican economy will for some time continue to be severely impacted by the consequences of the conflict in Europe, coupled with the ongoing effects of the COVID-19 pandemic. These factors, the Jamaica Chamber of Commerce (JCC) is indicating, are combining to push up costs for all Jamaican firms, with the nation’s small businesses likely to be most seriously affected. 

Bearing this in mind, the business association is pointing to the cost of financing as an area demanding urgent attention so as to ensure business survival and job growth, as well as the avoidance of a renewed recession. 

The JCC is noting that the cost of financing for its members and for the business community in general, is being adversely affected by the wide spreads that are a feature of the buying and selling of foreign exchange – particularly physical cash – as well as rising banking fees, all of which suggests that there is still not enough competition in finance generally. 

The Chamber is also indicating that even as it notes the recent spike in inflation, and its possible second round impact, it is nonetheless concerned about the impact of the continued rise in the policy rate of the Bank of Jamaica, with its potential impact on overall lending rates. In its view, Jamaica’s commitment to the prudent fiscal policy of balancing the budget in the current and next fiscal years, suggests that that there is little issue in Jamaica of excess demand, unlike the case with many of our trading partners that have incurred large fiscal costs in their efforts to combat the pandemic. 

The JCC suggests that the impact of increasing interest rates on excess demand will be very limited and late in coming. Instead, most of the rise in inflation will be due to continued supply side issues, now sharply accelerated to include a steep rise in oil and wheat prices due to the impact of the war in Ukraine. Noting that the expectation is that the US Federal Reserve will itself be hesitant to raise interest rates significantly, even in light of its own inflationary pressures, the JCC does not believe that further interest rate increases locally are warranted.