S&P Global Ratings affirmed its ratings on Jamaica’s debt management last week but upgraded the country’s outlook from stable to positive.

In a release issued on September 24, the international rating agency said it “affirmed its ‘BB-‘ long-term foreign and local currency sovereign credit ratings on Jamaica, its ‘B’ short-term foreign and local currency sovereign credit ratings, and its transfer and convertibility assessment of ‘BB’.”

While S&P did not provide a rationale for the affirmations of its ratings, it pointed to a possible improvement in ratings “over the next 12-18 months if Jamaica demonstrates continuity of fiscal policy that increases the sovereign’s economic resilience. “We could also raise the rating if the economic growth rate rises consistently and converges with that of peers at a similar level of economic development,” it continued.

At the same time, the agency attributes the positive outlook to the possibility of a ratings upgrade if the continued strengthening of the policy framework leads to more sustainable public finances and balanced economic growth over the long term. Additionally, it projects that continued, cautious public sector management combined with macroeconomic policy that enhances economic resilience could strengthen Jamaica’s institutional framework.

While noting that a general election is due over the next year and with it the possibility of an administration change, S&P hinted at the likelihood of a fiscal policy change and the impact that could have on the outlook.

“We could revise the outlook to stable during the next 12-18 months if we believed changing fiscal policy would lead to sustained deficits, reversing debt reduction and resulting in a persistently higher debt burden; or if the economy fails to perform as expected, weakening the country’s external position,” it stated.

However, it pointed out that Jamaica has a stable democracy with a history of smooth transitions of government between the parties. Moreover, it said the ruling Jamaica Labour Party and People’s National Party share similar stances on economic policymaking and commitment to fiscal consolidation.

Further justifying its upgrade from a stable to a positive outlook, S&P commended the Government of Jamaica’s response to Hurricane Beryl on July 3 and highlighted what it termed “the modernisation of the Bank of Jamaica”.

“After Hurricane Beryl in early July, the Jamaican [G]overnment had ready access to contingency savings, insurance proceeds, and multilateral funding to meet its immediate financial needs without compromising its ability to service debt. This reflects preparations Jamaica has made in past years to be ready for such events and demonstrates proactive policymaking,” the review outlined.

“Other indicators of institutional strengthening include the modernization of the Bank of Jamaica, with its legal independence and official inflation-targeting mandate. We could raise the rating if there is continuity in Jamaica’s generally effective policymaking, sustainable public finances, and government support for balanced economic growth,” it added.

Looking at the country’s economic performance, S&P noted that while the country has experienced growth since 2021, the adverse impact of Hurricane Beryl on agriculture and the slowdown in tourism arrivals indicate possible economic contractions.

“We now expect a 1.5 per cent contraction in the economy for 2024, versus our pre-hurricane expectation of 1.6 per cent growth. We expect that, as the country recovers, growth will resume and by 2026 and 2027 will return to trend of 1 per cent to 2 per cent annually. We expect GDP per capita will be US$7,200 in 2024,” the report said.

While on the upside Jamaica has a diversified economy that supports economic growth, S&P highlights the country’s vulnerability to natural disasters such as droughts, floods and hurricanes. Additionally, it cites growth constraints such as security costs, perceived corruption, low productivity, and low business competitiveness.