KINGSTON, Jamaica, Monday February 27, 2017 – The Bank of Jamaica (BOJ) is reporting that commercial bank credit to the private sector grew by 14.8 per cent last year.
BOJ Governor Brian Wynter said this is higher than for the corresponding period in 2015, when credit to the sector went up by 9.5 per cent. In real terms, loans grew by 12.8 per cent for 2016, compared to 5.7 per cent in 2015.
The BOJ Governor attributed the uptick in private-sector credit to a reduction in government’s borrowing from the local market.
He said borrowing by the government and its agencies diverted the flow of financial resources from the private sector, making investment harder and more costly, thus impeding growth. This scenario is commonly referred to as ‘crowding out’.
“Now with several quarters of ‘crowding in’, we are witnessing a long-overdue correction, and we can now consider that the era of Government ‘crowding out’ has come to an end,” Wynter said.
He further pointed to government’s programme of fiscal discipline and smart debt management, which has resulted in a fall in the debt to gross domestic product (GDP) ratio from 143 per cent to 122 per cent as at March 2016.
Wynter said this performance contributed to a boost in Jamaica’s global rankings by international rating agencies Moody’s and Fitch.
He reiterated that Moody’s upgraded Jamaica’s sovereign debt rating to B3 in November 2016. Fitch, he added, affirmed its single-B sovereign rating for the country, pointing out that “Jamaica’s sovereign risk premium has trended to all-time lows”.
“It is no surprise, then, that annual growth in commercial bank credit to the private sector grew,” the Governor said.
The sustained increase in commercial bank credit has also supported Jamaica’s improved economic performance over eight consecutive quarters, with GDP growing between one and two per cent during the December 2016 quarter, according to Wynter.