Falling travel helps push remittances higher
Published:Wednesday | November 25, 2020 | 12:07 AMSteven Jackson/Senior Business Reporter
Remittance flows to Jamaica have risen nearly 40 per cent in the September quarter, a spike that is being attributed in part to changing travel patterns, as well as crisis support since the pandemic, according to Bank of Jamaica Governor Richard Byles.
With fewer persons flying into Jamaica, persons who would normally bring cash for family during trips to the island – cash that would not traditionally be counted as remittance – are now said to be sending those funds instead through the money transfer system. The central bank tracks the latter in its monthly estimates of remittance flows.
Remittances initially say a dip but quickly recovered after the coronavirus showed up in Jamaica. During the third quarter, July-September, inflows amounted to US$865.2 million, up 39.5 per cent from US$620 million in the comparative 2019 period, according to the a year earlier.
Byles said at his quarterly press briefing last week that less travel means relatives are not carrying cash in transit.
“We have tried to understand the cause, and there are a number of things – not just one explanation – but remittances tend to be counter-cyclical,” he said, meaning that remittances grow during times of economic contraction.
“When we are in need, for instance when a hurricane hits us, then it rises again,” said Byles. “But I think there is one other thing that is substantial. This pandemic, the big effects is that people cannot travel. So, in summer you would have had a lot of Jamaicans who would have returned for visits. They would have carried a couple hundred dollars in their pocket. If they cannot come, then maybe they are sending that money through remittances. That could be part of the reason.”
His statement finds support in the 66 per cent drop in airline travellers to Jamaica over the January-October. There were 740,830 stopovers in the period compared to 2.2 million in 2019.
A BOJ representative also told the Financial Gleaner that foreign travellers to Jamaica are staying longer on the island for periods, and drawing down more funds from their US bank accounts in the process. Although remittances are generally funds sent from one citizen to another, the drawdowns would initially be classified as remittances, the BOJ manager said.
The average length of stay of foreign nationals increased to 11 days in October from 7.7 days a year earlier. Additionally, the average length of stay for non-resident Jamaicans increased to 26.7 days from 16.3 days.
At the start of the pandemic the World Bank estimated that remittances could fall by 20 per cent for Latin America and the Caribbean.
Byles reasoned that in Jamaica’s case, where the flows are steady, some of the remittances might be coming from public sector workers whose jobs are secured.
The rise in money transfers have been positive for the country’s balance of payments, serving to reduce the imbalance on the current account somewhat.
The current account deficit, CAD, for the June quarter amounted to US$105.9 million or 0.7 per cent of GDP, reflecting a deterioration by US$44.7 million relative to the June 2019 quarter.
“The CAD for the period fiscal year ending 2021 is expected to be broadly sustainable in the context of the higher inflows of remittances before breaching the sustainability condition in fiscal year ending 2023,” stated the BOJ’s Quarterly Monetary Policy Report.