The Price of Everything: Jamaica’s Spring 2022 Kept Growing Even as Inflation Hit Levels Not Seen in a Generation

Through April, May and June of 2022, Jamaica found itself doing something that economists rarely see: growing at a healthy clip while simultaneously suffering its worst bout of inflation in more than a decade. The war in Ukraine kept commodity prices elevated, the Bank of Jamaica hiked rates with unprecedented aggression, and yet the planes kept landing and the tourists kept spending. It was a quarter that tested every assumption about how an open, small economy weathers a global price shock.

• Headline inflation breached 11% year-on-year, a decade-high for Jamaica.
• Bank of Jamaica raised policy rate six times in 2022, reaching 7% by year-end.
• Summer tourism tracked strongly toward best full year since pre-COVID 2019.
• Ukraine war kept global oil and food prices at painfully elevated levels.
• Remittances surpassed US$3.4 billion for full year, cushioning household incomes.
• GDP growth held at approximately 4% for 2022 despite inflation headwinds.

By the time April arrived, Jamaicans had absorbed several months of rising prices at the petrol pump, the supermarket checkout, and the hardware store. The global commodity shock triggered by Russia’s February invasion of Ukraine was not receding — if anything, it was deepening. Oil prices that had surged above US$130 per barrel in the immediate aftermath of the invasion had pulled back somewhat but remained far above pre-war levels, keeping jet fuel costs elevated and squeezing the margins of every business that moved goods around the island. Flour, cooking oil, chicken feed — the commodities that underpin the daily diet of ordinary Jamaican households — were all costing substantially more than they had a year earlier. The Statistical Institute of Jamaica reported headline consumer price inflation breaching 11 per cent year-on-year by May 2022, a level not seen since the fiscal crisis years of the early 2010s.

The Bank of Jamaica responded with an urgency that surprised many observers. Governor Richard Byles, who had spent the better part of two years nursing a fragile post-COVID recovery at historic low interest rates, was now chair of a Monetary Policy Committee executing the most aggressive tightening cycle in the central bank’s modern history. The policy rate, which had stood at 0.5 per cent as recently as August 2021, climbed through successive quarterly meetings. By mid-2022 it had reached levels that were beginning to transmit meaningfully into mortgage rates, consumer credit, and business lending costs. The BOJ’s mandate was clear: break the back of inflation expectations before they became self-fulfilling. The cost, inevitably, was that some of the momentum built during the COVID recovery would be tempered.

The remarkable feature of the second quarter of 2022 was how much of that momentum survived anyway. Tourism, the pillar around which so much of Jamaica’s recovery had been constructed, continued to perform strongly through the spring and into the summer high season. Airlift from North American departure cities — the crucial lifeline for any Caribbean destination — had been largely restored to pre-pandemic volumes. Visit Jamaica and the Jamaica Tourist Board were reporting that the 2022 summer bookings pipeline was among the strongest in the island’s history, driven partly by the same pent-up demand that had powered the exceptional winter season and partly by the simple fact that Jamaica’s value proposition — proximity to the United States, Jamaican dollar weakness against the US dollar, world-class beach and cultural product — looked attractive to North American travellers who were themselves feeling the bite of domestic inflation.

There was a certain irony in this dynamic that the island’s tourism economists did not miss. The very inflation that was making everyday Jamaican life more expensive was, in foreign exchange terms, making Jamaica a relatively better-value destination for visitors earning US dollars or Canadian dollars. The Jamaican dollar had weakened further against the US dollar through the rate-hike period, as monetary tightening in the United States under the Federal Reserve accelerated simultaneously with the BOJ’s own cycle. That depreciation made imports more expensive — compounding the commodity shock — but it also meant that a North American tourist’s spending went further in Jamaica than it had in 2019. Hotel occupancy at the major all-inclusive properties was running at rates that exceeded pre-COVID comparable periods, and tourism sector employment was recovering toward its pre-pandemic peak.

The fiscal picture, meanwhile, remained one of the few unambiguously positive stories of the quarter. Finance Minister Nigel Clarke had presented Budget 2022-23 in March with projections calibrated around the new inflationary reality, and the government was managing to hold the line on its primary surplus commitment even as the cost of imported goods inflated its own expenditures. The International Monetary Fund’s regular Article IV consultations praised Jamaica’s macroeconomic framework as a model of discipline, noting that the debt-to-GDP ratio — which had briefly surged back above 90 per cent during the COVID shock — was declining again and remained on a trajectory toward the legislated 60 per cent target. The JAM-DEX central bank digital currency pilot, launched by the BOJ in 2021 and expanding through 2022, represented a modernisation of the payments infrastructure that Clarke and Byles had championed as a long-term enabler of financial inclusion.

For ordinary Jamaicans, however, the quarter was defined less by bond yields and debt ratios than by the uncomfortable arithmetic of a household budget that wasn’t stretching as far as it had. The minimum wage had been increased — Andrew Holness’s government had raised it to J$9,000 per week in April 2021 and further adjustments were under discussion — but inflation was eroding real purchasing power faster than nominal wage gains could compensate. Labour organisations were pressing for cost-of-living adjustments. The private sector, facing higher input costs and rising interest rates simultaneously, was navigating a more difficult operating environment than the headlines about record tourism implied. Crime, which had remained persistently elevated throughout the COVID period, continued to impose costs on business and social life that no monetary policy tool could address.

The remittance channel — the informal but economically critical flow of funds from the Jamaican diaspora to families on the island — continued to perform at extraordinary levels. The Bank of Jamaica data through the first half of 2022 suggested that full-year remittances would again surpass US$3 billion, the historic threshold first crossed in 2021. For household after household in parishes from Westmoreland to Portland, the monthly Western Union or MoneyGram transfer from a relative in New York, Toronto, or London was not merely a supplement to local income but in many cases the primary buffer against the cost-of-living squeeze. The remittance economy, for all that it does not appear in formal GDP accounts on the production side, was performing as one of Jamaica’s most reliable economic stabilisers.

The BPO sector, too, was absorbing workers at a pace that provided a secondary buffer. Companies providing outsourced customer service, data processing, and back-office support to North American and European clients were expanding their Jamaican operations, attracted by the island’s English-speaking workforce, its time-zone alignment with the eastern United States, and a regulatory and incentive environment that had been deliberately cultivated since the early 2000s. The sector was approaching 60,000 employees by mid-2022, with expansion plans announced by several major operators suggesting continued growth through the year. For a labour market still absorbing the shock of COVID-era layoffs, particularly in tourism-adjacent hospitality, this represented a meaningful structural diversification.

The quarter closed with Jamaica’s GDP trajectory still firmly positive — growth was tracking toward the 4 per cent range for the full year, which would represent the second consecutive year of solid expansion after the catastrophic 2020 contraction. Tourism arrivals for the first half of 2022 were substantially above the same period in 2021, and the full-year figures were shaping up to approach the pre-COVID record of 2019. Inflation remained the dominant policy preoccupation, and the BOJ’s rate cycle was far from finished. But the economy was proving more resilient than the severity of the external shock might have suggested. Jamaica had navigated the pandemic by holding its fiscal and monetary frameworks together under extreme stress. It was now attempting the same trick against a different adversary: not a virus, but the price of everything.

What This Means

The second quarter of 2022 demonstrated that Jamaica’s diversified external revenue base — tourism, remittances, BPO — functions as a genuine shock absorber in ways that a more domestically dependent economy could not replicate. No single policy lever could prevent imported inflation from eroding household purchasing power; what prevented it from triggering a broader economic deterioration was the continued inflow of foreign exchange from three distinct sources, each partially independent of the others. The quarter also illustrated the asymmetric nature of commodity-price shocks for small island economies: rising global oil prices hurt Jamaican importers and consumers, but the Jamaican dollar depreciation that followed made the island more price-competitive for foreign visitors, creating a partial offset that would not exist for a landlocked, non-tourism economy.

The Road Ahead

Through the second half of 2022, global commodity prices would begin to retreat from their post-invasion peaks as markets adjusted to the new supply landscape and recession fears in major economies began to dampen demand. The Bank of Jamaica’s rate cycle would continue, pushing the policy rate to around 7 per cent by year-end — a level that would have been unthinkable twelve months earlier. Inflation would begin to moderate from its mid-year highs, a trend that would accelerate through 2023 as base effects and lower global commodity prices worked through the annual calculation. Tourism would close 2022 with its best performance since the record year of 2019. And Jamaica’s long-term debt reduction story would remain intact, proof that fifteen years of painful fiscal discipline had built a framework capable of weathering not one but two major global shocks in consecutive years.

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