Rating agency has faith in country’s economic management

World-renowned rating agency Standard & Poor’s (S&P) today affirmed Jamaica’s B+ rating.

With the government looking to combat the ravages of the COVID-19 pandemic and its impact on the economy, this is heartening news.

In a release, S&P wrote: “S&P views the Jamaican economy as relatively well-diversified and expects a strong rebound in growth in 2021, driven largely by the reopening of the tourism sector. The pace, however, will depend on the “timing of the outbreak peak in Jamaica and key visitors’ countries.”

S&P anticipates the rebound will commence in 2021 but expects full recovery in financial year 2022-2023.

The rating agency noted the recent return of the JLP government in the September 3 general elections and, with the overwhelming mandate given by Jamaicans, believes the administration will support the accomplishment of macroeconomic stability through continued commitment to fiscal responsibility and consolidation.

Going further, S&P made it clear that it took account of the fiscal and economic realities facing the country as a result of the pandemic and the actions by the government to address it in Jamaica.

“The onset of the pandemic caused a disruption in some productive sectors, particularly tourism, which was a contributory factor to the contraction in the country’s GDP. It also disrupted the trend of fiscal surpluses realised over the past three years, with Jamaica programmed to post a fiscal deficit this year,” S&P said.

This rating pertains to the Government of Jamaica’s Long -Term Foreign and Local Currency Issuer Default Rating (IDR). However, it is of the view that the outlook, given the circumstances, looks negative.

Despite the gloomy outlook, S&P says it expects Jamaica to return to fiscal surpluses in the short-term due to the government’s commitment to prudent fiscal policy management.

The government started this year with a J$90-billion cash balance but, with COVID-19 running rampant, revenues are projected to decline by $87 billion and COVID-19 expenses to come in at a whopping J$40 billion.

Responding to S&P’s latest rating on Jamaica, Finance Minister Dr Nigel Clarke said: “The affirmation of Jamaica’s credit rating at B+ is a sign of confidence in Jamaica’s future. We entered the pandemic with significant fiscal buffers, which provided us with the flexibility to absorb and respond to the crisis without affecting medium term economic prospects.

“As such, as S&P forecasts, Jamaica is poised to return to economic growth in fiscal year 2021-22 although achieving pre-COVID levels of economic output will not occur in the medium term. The fact that we are continuing to strengthen, build and entrench economic institutions in the middle of the pandemic, through modernising our central bank and making it independent, launching a public investment map and tabling the Bill to establish a Independent Fiscal Commission is real show of strength.

“These institutions will enhance transparency and accountability in the implementation of fiscal and monetary policy. These are important to enhance policy credibility long into the future.”