Covid-19 Response Will Narrow Jamaican Fiscal Surplus

• Jamaica’s fiscal surplus will decline over the coming quarters as the government’s economic stimulus response (approximately 1.1% of GDP) to the coronavirus pandemic reduces revenue intakes and increases expenditures.
• A sharp contraction in real GDP growth in 2020, driven by public health restrictions on economic activity, will further undermine revenues.
• In addition, it is expected that the government’s proposed reduction of the general consumption tax (GCT) from 16.5% to 15.0% and a one-time tax credit to small and medium-sized enterprises (SMEs) will provide additional drag on revenue intakes.
• Notably, the economic effects of the coronavirus pandemic will slow the pace of Jamaica’s debt drawdown and like force legislators to seek an exemption from Jamaica’s fiscal responsibility law, which mandates that debt as a percent of GDP falls below 60.0% by March 2026. 

(Source: Fitch)