Elevated Crime And Inflation Pose Risks To Social Stability In Jamaica

• Fitch Solutions expects political risk in Jamaica to remain elevated in 2022, offering potential headwinds to Jamaica’s economic recovery. Fitch has adjusted down the country’s score in its Short-Term Political Risk Index (STPRI) from 72.3 to 71.7, to reflect increasing inflation and elevated levels of violent crime, which it believes the government has few tools to address. 
• While the country’s STPRI score is still buoyed to a certain extent by an easy policymaking environment, with the ruling the Jamaican Labour Party (JLP) benefitting from a sizeable majority in the House of Representatives, the downward adjustment places the country 14th out of 23 countries in the Caribbean region. 
• Elevated inflation will weigh on sentiment and increase the risk of popular unrest. Inflation has continued to climb in recent months, reaching 9.1% y-o-y (0.8% m-o-m) as of end-2021, while utility prices rose 12.6%, dampening households’ ability to pay for necessities such as food, transportation and utilities like electricity and water. 
• In response to the high prices, the President of the Transport Operators Development Sustainable Services, Egerton Newman, announced on February 2 that his organisation of private transportation operators are ready to take to the streets in protest of spiralling fuel prices if the government does not act. 
• While Fitch expects that inflation will ease in H222, price growth will remain elevated by historic standards this year. Inflation is expected to average 6.0% in 2022 compared to 5.8% in 2021 and 3.6% in the five years before the Covid-19 crisis. This is likely to weigh on household sentiment, even as unemployment falls and remittances remain fairly robust.

(Source: Fitch Solutions)