The Jamaica Manufacturers and Exporters Association (JMEA) has expressed cautious optimism regarding the Bank of Jamaica’s (BOJ) recent decision to reduce interest rates. However, the association warns that this move alone is insufficient to address the ongoing economic challenges facing the country.
Last Tuesday, the BOJ reduced its benchmark policy rate by 25 basis points to 6.75 per cent per annum, marking the first rate cut in nearly three years. Despite this, the JMEA believes that more aggressive action is needed to significantly impact the economy.
JMEA President Sydney Thwaites stated, “We hope this move is just the beginning and that further rate cuts will follow urgently. It’s imperative that we see additional reductions sooner rather than later to alleviate pressure on borrowers and restore liquidity in the credit markets.”
Thwaites stressed that only bold and swift measures will drive meaningful economic recovery.
Echoing this sentiment, JMEA Past President John Mahfood called the BOJ’s rate cut “a small step in the right direction,” but emphasized that it is long overdue. Mahfood noted that the economy has shown signs of slowing since February, with consumer purchasing power eroding as salary increases fail to keep pace with inflation, particularly in the face of rising food prices.
“The construction sector is also in decline, with homebuyers unable to afford mortgage rates exceeding nine per cent. GDP grew by only 1.5 per cent in the first quarter and is likely to drop to one per cent in the second quarter,” Mahfood added.
Mahfood further highlighted the challenges faced by the Jamaican population, noting, “Our per capita income is extremely low at US$5,000, leaving much of the population struggling. This minor rate cut will not significantly impact the economy, and we need to see interest rates fall below five per cent as quickly as possible. Even then, it will take at least a year for the economy to begin to rebound.”
The JMEA underscored the severe impact of last year’s high-interest rates on the manufacturing industry, which has resulted in slower growth and a challenging business environment. The association also pointed to the lack of new initial public offerings on the Jamaica Stock Exchange as a clear indication that the current financial climate is deterring new investments. High borrowing costs, they noted, are stifling businesses’ ability to access the necessary capital for expansion, thereby hindering growth and innovation.
For her part, Kamesha Blake, Executive Director of the JMEA, highlighted the additional financial challenges faced by the industry due to the economic repercussions of Hurricane Beryl in July, which disrupted the agricultural sector and contributed to inflation.
The JMEA had previously urged the BOJ to avoid further tightening monetary policy, warning that increased borrowing costs could hinder recovery efforts across multiple sectors. Blake expressed relief that the BOJ has begun addressing these concerns with the recent rate cut.
However, Blake emphasised the need for financial institutions to adopt a more aggressive approach in providing loans and stimulus packages. She noted that by increasing access to affordable credit and offering targeted financial support, banks and other lending institutions could play a vital role in stimulating economic recovery and growth, particularly for businesses that have been hardest hit by recent challenges.
While acknowledging the BOJ’s recent actions as a positive step, the JMEA stressed the need for more substantial and timely policy adjustments to achieve sustained economic growth. In the meantime, the association remains committed to working closely with the BOJ to support a quicker and more robust recovery for all Jamaicans.
