Jamaica Will Return to A Fiscal Surplus On Rebounding Revenues

• Jamaica’s fiscal balance will shift to a surplus of 1.4% of GDP in FY2021/22, from a deficit of 2.8% in FY2020/21, as the country’s economic rebound from the impact of the COVID-19 pandemic boosts revenues. The government ran budget surpluses from FY2017/18 to FY2019/20 as part of Jamaica’s consecutive IMF programmes from 2013 to 2019. However, the coronavirus pandemic caused a sharp contraction in economic activity and revenues in FY2020/21, flipping the balance into deficit. 
• Expenditures are anticipated to grow 8.0% in FY2021/22 owing to capital and recurrent spending aimed at supporting the economy as it emerges from the pandemic. 
• Total revenues are expected to rebound to 25.0% growth in FY2021/22, on the back of increased tax collections as the Jamaican economy recovers, after a fall off of 11.4% in FY2020/21 due to the impact of the pandemic on the local economy. Remittance inflows and the loosening of restrictions on activity, particularly in the tourism sector, have generated more revenues from income and sales taxes, leading to a 39.4% YoY rebound in revenues from April to July of 2021. 
• Jamaica’s fiscal surplus is expected to grow to 1.9% of GDP in FY2022/23, as revenues continue to outpace expenditures. As the tourism sector continues its recovery, the government is expected to rein in spending, returning to the fiscal consolidation it pursued before the pandemic. The unemployment rate is anticipated to fall in the months ahead, from 9.6% in April 2021, reducing the need for social spending. This will shift the composition of spending towards capital programmes, which will accelerate the growth of the economy. 
• However, another spike in cases and the re-imposition of no movement days could derail these projections.

(Source: Fitch Solutions)