Jamaica Economic Intelligence | Annual Review 2022 | January–December 2022
Key Findings
- Jamaica’s tourism sector completes its recovery in 2022: stopover visitor arrivals approach or match 2019’s pre-pandemic record, with full-year hotel revenue per available room exceeding any prior year in the series — the destination that nearly died in 2020 has, in the headline measure, returned
- The Federal Reserve raises its policy rate eleven times in 2022, from a range of 0.00–0.25 percent to 4.25–4.50 percent — a cumulative 425 basis points in a single calendar year, the most aggressive tightening cycle since Paul Volcker’s era; US CPI peaks at 9.1 percent in June before declining to 6.5 percent by December
- FTX, the world’s second-largest cryptocurrency exchange, collapses in November after a liquidity crisis exposes an $8 billion shortfall in customer funds; founder Sam Bankman-Fried is arrested in the Bahamas in December; the episode is the most consequential financial fraud in the digital asset market’s history
- The UK’s Liz Truss government triggers a gilt market crisis with unfunded tax cuts in September; Truss resigns within 45 days and is replaced by Rishi Sunak, whose conventional fiscal approach stabilises the market and allows sterling to recover ground lost in the crisis
- Russia’s invasion of Ukraine enters its second year of combat, with no negotiated resolution in prospect; the commodity shock of Q1 moderates through the year as energy markets adapt and Ukrainian agricultural exports resume partially, but the war’s structural effects on the global order remain unresolved
- The Bank of Jamaica’s tightening cycle substantially completes its work through 2022, with the policy rate having moved from historically accommodative levels to the highest since the pre-reform era; inflation, while still above target at year-end, is showing clear signs of the deceleration that the BOJ’s framework predicted
It is late November 2022. The winter season is beginning. The bookings are the best since 2019. In the Bahamas, Sam Bankman-Fried is being processed by police after the collapse of FTX took eight billion dollars of customer funds with it. In Washington, Jerome Powell is noting that the November CPI number — 7.1 percent — means the rate cycle’s pace can moderate to 50 basis points in December, but that the terminal rate is still higher than it was. In London, Rishi Sunak is dismantling the Truss government’s mini-budget with the methodical care of a man who understands that the gilt market’s patience for British fiscal improvisation has been permanently revised. And in Jamaica, the year that was supposed to test whether the recovery was real has instead answered the question. The hotels filled. The revenue records fell. The institutions held through a rate cycle that was supposed to break something. 2022 was the year Jamaica’s recovery completed. Whether what follows is consolidation or vulnerability to the next external shock is the question 2023 will have to answer.
Tourism: The Recovery’s Completion
The headline number for Jamaica’s 2022 tourism story is the one the recovery’s architects set as their target when the border closed in March 2020: total stopover arrivals approaching or matching 2019’s pre-pandemic record. The Jamaica Tourist Board’s full-year data confirmed that 2022’s arrival trajectory, which had looked aspirational as recently as Q1, was sustained through the headwinds of the year’s second and third quarters and closed to within a margin of 2019’s record figures. The winter season that bookended 2022 — the strong Q1 performance and the encouraging forward data entering Q4’s winter — created the brackets within which the summer’s resilience was the decisive data point. Jamaica did not merely recover its tourism volume in 2022. It did so against the worst combination of external macroeconomic conditions in four decades.
The qualitative character of 2022’s tourism recovery was as significant as the quantity. The hotels that reached near-2019 occupancy levels in 2022 were doing so at room rates — average daily rates per occupied room — that were, in nominal terms, substantially above 2019’s levels. The US consumer who returned to Jamaica in 2022 was paying more for the same room than the 2019 visitor paid, and was paying it through a year of 7 to 9 percent consumer price inflation in their source economy. The pricing power that Jamaica’s resort corridor operators sustained through that environment — the ability to command a nominal premium over 2019 pricing at 2022 occupancy rates — was the clearest evidence that the destination’s positioning had improved through the pandemic recovery, not merely returned to its prior state. Hotels that had used the recovery period to restore rate discipline, to invest in product quality, and to maintain the service standards that the Resilience Corridor had reinforced, were capturing the benefit of a supply-constrained market at the moment of the demand recovery’s completion.
The full-year 2022 arrival data, when it is disaggregated, reveals a pattern that the quarterly reports had been building toward: the American market’s recovery was complete, the European and UK markets were recovering at a slower pace shaped by those economies’ own inflation and energy cost pressures, and the cruise market was rebuilding toward 2019 levels but had not yet matched them. The asymmetry between stopover and cruise recovery reflected a broader truth about the pandemic’s distributional effects on travel: the high-value, high-commitment traveller who books flights and hotel rooms returned first and most completely; the lower-commitment cruise passenger, whose port experience competes with a different set of onboard alternatives, returned later. For Jamaica’s resort communities and their dependent businesses, the stopover recovery’s completion was the economic event that mattered most.
The Fed’s Year: 425 Basis Points
The Federal Reserve’s 2022 trajectory — from emergency accommodation to the most restrictive monetary stance in fifteen years in a single calendar year — will be studied as one of the most aggressive tightening episodes in the institution’s modern history. The year began with the federal funds rate at 0.00–0.25 percent, where it had been since March 2020. It ended at 4.25–4.50 percent, the highest since 2007. Eleven rate increases at seven FOMC meetings: 25 basis points in March, 50 in May, 75 in June, 75 in July, 75 in September, 75 in November, 50 in December. No prior twelve-month period in the data had seen a comparable cumulative move, and the pace’s escalation — from the 25 basis points that was considered aggressive in March to the consecutive 75-basis-point moves of the summer and autumn — captured the institutional recognition, confirmed belatedly in each quarterly dot plot revision, that the scale of the inflation problem had been systematically underestimated.
US CPI peaked at 9.1 percent in June — the highest since November 1981 — and then declined with a consistency that the Fed’s September projections had suggested but that markets had taken time to fully price: 8.5 percent in July, 8.3 in August, 8.2 in September, 7.7 in October, 7.1 in November, 6.5 in December. The peak-to-year-end decline of 2.6 percentage points confirmed that the June number was, in fact, the cycle’s high — a question that had been genuinely uncertain through Q3. The deceleration validated the argument that a significant portion of the 2022 inflation reading was a function of the Russia-Ukraine commodity shock and the reopening demand surge, both of which were transitory in a way that the Fed’s critics had always acknowledged while insisting the underlying inflation problem was not. Core inflation — excluding food and energy — proved stickier, ending 2022 around 5.7 percent, reflecting the shelter and services inflation that the commodity peak’s reversal could not address. The Fed’s 2023 task was established by December’s data: the last mile of the inflation fight, from roughly 6 percent toward 2 percent, with the commodity component already retreating and the core services component requiring tighter financial conditions to compress.
For Jamaica, the Fed’s 425 basis points had arrived in every channel the series had been tracking since Jackson Hole 2021 first signalled the taper. Sovereign external debt spreads widened as global risk appetite contracted. The US dollar’s twenty-year high — reached in September, before partially reversing as inflation data turned — complicated the BOJ’s exchange rate management throughout the year. The US housing market, which had been one of the principal transmission channels for US household wealth expansion during the pandemic, contracted sharply as mortgage rates crossed 7 percent — a level not seen since 2002. Whether that contraction constituted the “soft landing” that Chair Powell had described as the Fed’s intent, or the leading edge of a recession that would follow in 2023, was the question that the calendar year’s end left unresolved. The Jamaican economy’s 2023 trajectory depended heavily on which answer was correct.
FTX: The Year’s Financial Crime
The collapse of FTX in November 2022 was, in its mechanics and its cultural significance, unlike any prior event in the cryptocurrency market’s history. Sam Bankman-Fried, who had been presented throughout 2021 and early 2022 as the adult in the room of the crypto industry — the MIT-educated, effective altruist-philosophising, regulatory-friendly face of a market that needed exactly such a face — had been operating the world’s second-largest cryptocurrency exchange as a mechanism for transferring customer funds to his affiliated trading firm, Alameda Research, which had used those funds to make highly leveraged bets that the 2022 bear market had rendered worthless. When a CoinDesk report in early November revealed that Alameda’s balance sheet was substantially composed of FTX’s own native token, a bank run began that the exchange could not survive. Within days, FTX had filed for bankruptcy, approximately $8 billion in customer funds were unaccounted for, and Bankman-Fried had resigned as CEO. In December, he was arrested in the Bahamas — the jurisdiction he had chosen for FTX’s headquarters — and extradited to the United States to face fraud charges.
The FTX episode had a specific regional resonance for the Caribbean. The Bahamas, which had positioned itself as a cryptocurrency-friendly regulatory environment and had approved FTX’s licence under its digital assets framework, found its regulatory reputation implicated in the failure of an exchange that regulators in multiple jurisdictions had treated as an industry exemplar. For Jamaica, which had been watching the Caribbean regulatory competition for fintech and digital finance investment with interest, the FTX collapse was a cautionary data point about the reputational risks that accompany the ambition to attract financial technology activity without the regulatory infrastructure to supervise it. The broader crypto market’s continued decline through the fourth quarter — Bitcoin ending 2022 near $16,000, down approximately 75 percent from its November 2021 peak — added context to the year’s earlier Terra/LUNA episode: the 2021 crypto bull market had contained concentrations of leverage, fraud and unrealised loss that the rate cycle was systematically exposing.
The BOJ’s Year: Framework Under Fire, Framework Delivered
The Bank of Jamaica’s formal inflation-targeting framework, adopted in 2020 and operational through its first full year in 2021, entered 2022 facing the most demanding external environment since the reform period began. Global commodity shocks, a Fed tightening cycle of historic aggression, a weakening Jamaican dollar under real exchange rate pressure, and domestic inflation running well above the 4–6 percent target range — the conditions were those for which the critics of inflation targeting in small open economies had argued the framework was least suited. The argument was familiar: a central bank that can only target interest rates is poorly equipped to address cost-push inflation driven by imported commodity prices and exchange rate dynamics that its domestic instruments cannot fully neutralise.
The BOJ’s response to that argument, delivered through its 2022 MPC decisions, was to raise rates consistently and to communicate clearly that the framework’s commitments were unconditional. Multiple rate increases through the year brought the BOJ’s policy rate to levels not seen since the pre-reform era. The pace of increases was calibrated to the inflation trajectory rather than front-loaded in the Fed’s manner, reflecting both the different structure of Jamaica’s inflation problem — more cost-push, less demand-pull than the US case — and the institutional judgment that the fragility of the tourism recovery required a measured approach. By year-end, domestic inflation, while still above target, was showing the deceleration that the tightening cycle had been designed to produce. The JMD, managed through intervention, ended the year in a range that the BOJ’s framework was designed to maintain. The inflation-targeting framework had not been broken by 2022’s stress test. It had been confirmed as operational under conditions that no prior year had imposed.
Jamaica’s fiscal performance through 2022 provided an additional data point in the reform architecture’s stress test. The primary surplus — the fiscal balance before debt service, the metric that the IMF-supported reform programme had established as the anchor for Jamaica’s debt sustainability — was maintained despite the year’s external shocks and the additional spending pressures that elevated energy costs and food prices created. Debt-to-GDP continued its decline from the crisis levels that had defined the pre-reform period. The institutional credibility that the fiscal architecture had built through years of primary surplus maintenance was a resource that buffered Jamaica’s external financing conditions against the full severity of the emerging market repricing that accompanied the Fed’s tightening cycle.
What This Means
Homeowners close 2022 in a property market that has navigated the year’s external shocks with more structural integrity than the shock’s severity might have predicted. The BOJ’s tightening cycle moved mortgage rates from their pandemic-era lows to their highest levels in years, compressing the buyer pool’s qualification capacity and slowing the transaction pace that the recovery’s early quarters had established. Against that rate headwind, the supply constraint that the series has tracked since before the pandemic continued to assert itself: the housing stock is not growing fast enough to satisfy the demand of a workforce whose employment income has recovered, and that supply constraint is providing a floor under property values in the major urban and resort-adjacent markets. Homeowners who entered 2022 with fixed-rate mortgages leave it with their monthly obligations unchanged and their asset values supported by scarcity. Those who have been waiting to buy leave it with a clearer sense of the rate environment they must underwrite against in 2023.
Renters close 2022 in a position that the headline employment recovery conceals as much as it reveals. The tourism workforce that returned to full employment in 2022 — the hotel workers, the restaurant servers, the transportation operators, the entertainment and service economy that depends on visitor volume — recovered nominal wages at a pace that the year’s 7-to-9 percent US inflation and proportionally elevated Jamaican consumer prices outran for most of the year. Real wages in the hospitality sector, having recovered in nominal terms, remained below their pre-pandemic real purchasing power at year-end as the inflation shock worked through the domestic cost of living. The housing supply gap that has been a structural feature of Jamaica’s rental market since before the reform period has not narrowed; if anything, the construction cost inflation and tightening financing environment of 2022 has made the affordable rental gap wider. The renters who benefited most clearly from 2022 were those in parishes with the strongest tourism employment, where full-time hours and tips added meaningfully to annual income even as the purchasing power of those earnings faced pressure from the cost of living.
Developers close 2022 having navigated a year in which every input to the development calculus moved against them while the demand case continued to strengthen. Construction financing costs rose with the BOJ’s tightening. Material costs, while moderating from the supply chain crisis’s worst peaks, remained elevated above pre-pandemic baselines. Labour competed with the recovering hospitality sector for skilled workers. The buyer pool’s mortgage qualification capacity contracted with rising rates. Against all of that, the demand for residential property in Jamaica’s major markets is unambiguously stronger than it was before the pandemic, the supply gap is wider, and the employment recovery has produced a class of would-be buyers whose income qualifies them for ownership if the rate environment and asking price can be brought into alignment. The developers who will emerge from 2022 in the strongest position are those who maintained project discipline through the cost environment — who did not break ground at pre-tightening cost assumptions, who structured financing to survive the rate cycle’s peak, and who are positioned to deliver product into a market that will be buying again when the rate cycle turns.
Businesses across Jamaica close 2022 with the clearest revenue recovery since the pandemic began, and with an equally clear picture of the cost environment that the revenue recovery had to survive to be profitable. The tourism and hospitality sector’s revenue per available room figures were the best in the series’ history; the operating cost figures reflected energy prices, food input costs, and wage settlements that were the most expensive in years. The businesses that navigated 2022 successfully — that converted top-line recovery into bottom-line improvement — were those that entered the year with the pricing power and cost discipline to absorb a commodity shock without sacrificing the margin they had rebuilt through the recovery. Those businesses are well positioned for 2023’s winter season if the demand picture holds. Those that were unable to pass through cost increases or that carried balance sheet vulnerabilities from the pandemic period enter 2023 in a more fragile position than the headline tourism numbers would suggest.
Diaspora Jamaicans close 2022 having experienced the full complexity of a year in which global macroeconomic stress affected both sides of the remittance relationship. In the United States — the primary source of Jamaica’s diaspora remittance flows — the diaspora community navigated the year’s 7-to-9 percent inflation, the equity market’s 20 percent bear market decline, and the crypto market’s 75 percent collapse against a backdrop of continued strong employment. The US labour market proved, through 2022, to be the most resilient major economic sector: unemployment remained low, job openings remained elevated, and wage growth — while not matching inflation — was higher than in any prior recovery period the series has tracked. Remittances to Jamaica through 2022 were sustained at the elevated levels established during the pandemic, confirming again the structural resilience of diaspora financial commitments to the home country. UK diaspora Jamaicans faced the additional headwind of sterling’s depreciation against the Jamaican dollar, which reduced the JMD value of pound-denominated remittances through the year’s most turbulent period.
Outlook: 2023
The question Jamaica enters 2023 with is not whether the recovery is real — 2022’s data answered that — but whether the completed recovery can be sustained and built upon as the external environment that tested it in 2022 continues to evolve. The Federal Reserve’s rate cycle is approaching its terminal point but has not reached it; the “last mile” of US inflation’s return to 2 percent is the most technically demanding, and the rate environment that Jamaica’s sovereign debt, mortgage market and development financing must operate within will remain elevated through at least the first half of the year. The Russia-Ukraine war has no visible resolution, but the acute commodity shock of March 2022 has moderated as markets adapted; the structural implications of the war for global trade and investment flows are long-term rather than quarter-to-quarter. The FTX episode’s legal proceedings will run through 2023 and beyond, but the crypto market’s effect on Jamaica’s real economy was always more indirect than direct.
The winter season’s forward data entering 2023 is encouraging. The US consumer, whose balance sheet was compressed through 2022 by inflation, bear markets and rising mortgage costs, continues to book Jamaica holidays at a pace that suggests the destination’s post-pandemic positioning has been durable. If the US labour market’s resilience — the one economic bright spot for the diaspora and the source market’s travel capacity through 2022 — continues into 2023 without the recession that the yield curve’s inversion has been warning about since Q1 2022, Jamaica’s 2023 tourism picture may be the consolidation of the 2022 recovery rather than a reversal of it. That is the scenario the Jamaica economy’s structural foundations most clearly support. The alternative — a US recession that cuts the source market’s travel spending sharply in the year after the recovery’s completion — is the scenario that the rate cycle’s “pain” rhetoric was preparing the market for. Which of those two scenarios 2023 delivers will determine whether this annual review’s conclusion — that the recovery has completed on a durable foundation — was a correct assessment or a premature one.
Jamaica Economic Intelligence is an independent data-driven journalism series tracking Jamaica’s economic performance across the housing, tourism, fiscal and monetary sectors. Historical data drawn from Bank of Jamaica, Statistical Institute of Jamaica, International Monetary Fund and Jamaica Tourist Board publications. This report is the Annual Review for 2022: January–December 2022.
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