Byles puzzled by pace of depreciation
Co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles, says he is puzzled by the continuing depreciation of the Jamaican dollar against its United States counterpart, given the fundamentals of the economy.
"I am perplexed as to why the market continues in that direction, though, I would say not at the same pace as it has been in the past," he said, having observed that the percentage depreciation for 2014 was significantly less than it was for 2013.
The Jamaican dollar lost 14 per cent of its value in 2013 and eight per cent in 2014, when it closed the year at $114.66.
Year to date, February 9, the currency has fallen further by one per cent, but that, too, was a slower pace than the 1.3 per cent decline at this same point in 2014.
Reiterating what Bank of Jamaica Governor Brian Wynter and himself have said in the past, Byles said the rate of inflation in Jamaica and that in the United States (US), the island's major trading partner, "determines whether we are competitive or not".
If Jamaica is not having high inflation, "then the difference between us and the US should be smaller and the [depreciation] that is necessary to stay competitive should be smaller too," he said.
"So inflation for us is lower, that should help. The oil cost is much less, so that should help massively. It means that the demand for foreign currency to pay for crude is much less."
In addition, he said Jamaica is in the height of the tourist season, where stopover arrivals increased by 5.9 per cent in December 2014 when compared with the same period the year before.
Data released by the Jamaica Tourist Board also revealed that compared with calendar year 2013, stopover arrivals and cruiseship passenger numbers increased by 3.6 per cent and 12.5 per cent, respectively.
Byles, who was speaking at his regular EPOC press conference at Sagicor Life Jamaica, New Kingston, last Thursday, said it should be noted that there were other factors impacting the movement of the dollar, citing as example dividends paid by companies that have shareholders abroad.
"Some of the most profitable businesses have shareholders that are not Jamaicans, so that tends to have lumpy demands for foreign currency. And there may be other issues that operated in either January or February," he said.
"But I would say I, too, would like to try and understand a little more carefully why it is moving even at a slower pace but, still, in my view, more than it needs to move given the fundamentals of the economy," said Byles, who is president and CEO of Sagicor Group Jamaica.
Having reported that tax revenues for the fiscal year to December 2014 remained below target, attributable in part to the underperformance of general consumption tax (GCT) on local and imported goods, Byles said consumers may be spending less because they can't afford the higher prices.
"Maybe there's a bit of that, but my understanding is that December, generally, was a strong month in the retail business. All retail business people I have spoken with, some of the big retailers, wholesalers, said it's been a good month," he said of the Christmas season.
The EPOC co-chairman said that GCT on imports performed better than the consumption tax on local purchases. However, he thought the underperformance was reflective of refunds that were made by the Government.
"... the number they publish is a net number. But when they make refunds you might say that should not be in the budget," he said.
When the EPOC meets with Tax Administration Jamaica officials, expected at the next committee meeting in March, "we will find out if it is really compliance why these numbers are like this", said Byles.
He added that the Government has underspent, by $15.2 billion for the fiscal year to date, "so that more than compensates for the lack of revenue" from GCT and other areas.