Fitch Revises Jamaica's Outlook to Positive; Affirms at 'B+  

 

• Fitch Ratings has revised the Rating Outlook on Jamaica's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to Positive from Stable and affirmed the IDRs at 'B+'.
• The revision of the outlook reflects Jamaica's significant progress with debt reduction, despite the pandemic shock, its stability-oriented institutional framework and favourable financing conditions, reinforced by the new IMF facilities. Public debt has resumed its declining trajectory following the temporary increase in 2020, to an estimated 85% of GDP at the end of 2022, below its pre-pandemic level, although still much higher than the current 'B' median of 57% of GDP.
• Jamaica's 'B+' rating is also supported by World Bank Governance Indicators that are substantially stronger than the 'B' median. The ratings, however, remain constrained by deep structural weaknesses, including a high crime rate and low productivity reflected in subdued underlying growth potential, estimated between 1-2%.
• Fitch forecasts general government debt-to-GDP will decline to 80% by the end of 2023 and to around 70% in 2026; however, meeting the government's 60% debt target by 2028 looks challenging. Nevertheless, sizeable primary budget surpluses are expected to be the key driver of the debt decline.
• Jamaica has a strong, stability-oriented economic policy framework that is built on two key pillars: the Bank of Jamaica (BOJ) inflation-targeting monetary policy regime and fiscal policy anchored on debt reduction targets. The policy framework proved flexible enough to cope with the double shocks of the pandemic and more recently the exogenous energy and commodity price shocks. The government has built a track record of fiscal prudence that has gained credibility over recent years and it will be further institutionalized by the new independent fiscal commission which will judge the compliance of the draft annual budgets with the fiscal rule.
• A negative rating action could result from a sizeable fiscal deterioration, a marked increase in debt service costs and/or a sizeable external shock that weakens growth and/or external finances, such as a natural disaster or sharp fall in tourism. On the contrary, a positive rating action would result from a sustained decline in the government debt-to-GDP ratio over the medium term and/or enhanced resilience of economic growth without the emergence of macro imbalances and shocks to external finances.

(Source: Fitch Ratings)