Political Risk Improves In Jamaica Due To Falling Inflation, Higher Employment

• Fitch anticipates that historically high inflation will continue coming down in Jamaica, relieving the pressure on households and supporting social stability.
• Inflation has already fallen from a high of 11.8% y-o-y in April, to 10.2% in August, and it is further expected that inflation will slow to 8.6% by end-2022 and 4.8% at end-2023, mainly due to falling commodity prices.
• On the other hand, employment, which has been bolstered by a recovering tourism sector, will contribute further to Jamaica’s stability. Consequently, the unemployment average is expected to come in at 6.8% in 2022 and 7.0% in 2023, down from 8.4% in 2021.
• Jamaica’s ‘social stability’ component has come up significantly, from 45.0 to 52.5 out of 100 due to the aforementioned fall in inflation and rebound in employment. As such Fitch revised the country’s overall score in its Short-Term Political Risk Index (STPRI) from 69.2 to 72.7 out of 100.
• Nevertheless, longer-term risks to social stability come from the government’s commitment to fiscal consolidation, and possible lack of additional fiscal support in the event of an economic downturn.

(Source: Fitch Solutions)