Jamaica’s Financial System Showed Resilience in 2022 Amid Global Challenges

Despite a tumultuous global financial landscape marked by supply chain disruptions and rising commodity prices, Jamaica’s financial system demonstrated remarkable resilience in 2022, according to a report released by the Financial Policy Committee (FPC).

Economic Performance

The committee’s review of the financial system’s performance for 2022 highlighted several key trends. Notably, the Jamaican economy recovered to its pre-pandemic output levels towards the end of last year, with real economic activity expanding between 4.5 and 5.5 per cent.

Strong recoveries in the tourism and manufacturing sectors drove the positive economic performance.
Improvements were seen in key macroeconomic indicators such as the unemployment rate and public sector indebtedness.

Financial Institution Performance

However, the report also noted that:

Deposit-taking institutions’ (DTIs) asset growth slowed more than the domestic economy, leading to a decline in DTIs’ asset base as a percentage of GDP compared to end-2021.
Non-deposit-taking financial institutions’ (NDTFIs) asset growth also decelerated for the year.

Loan Quality and Profitability

Despite these challenges, the quality of loans to households and corporate sectors improved, with banks taking active steps to manage their loan portfolios. However:

Profitability in the financial sector fell due to a reduction in trading income.
Financial entities remained liquid and well-capitalized.

The report also highlighted a notable decline in bank fraud-related losses during 2022, with simulation results indicating a low level of spill-over and contagion risks within the interbank funding network.

Risks to the Financial System Remain Elevated

However, the FPC warned that risks to the financial system remain elevated, citing potential further inflationary pressures, associated increases in interest rates, and weakening global growth. Stress tests carried out on various financial sub-sectors showed that the financial system remains resilient to these shocks.

Full Report Available

The full report is available at Financial Policy Report 2022.