S&P sees full recovery of Jamaican economy by 2022/23

THE Ministry of Finance and the Public Service has announced yesterday’s S&P Global Ratings which affirmed the Government’s Long-term Foreign and Local Currency Issuer Default Rating (IDR) at B+.

S&P viewed 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 rating agency said that while the pace will depend on the “timing of the outbreak peak in Jamaica and key visitors’ countries”, it anticipates the rebound will commence in 2021, and expects full recovery in financial year 2022/2023.

Minister of Finance and the Public Service Dr Nigel Clarke told the Jamaica Observer last night that the ratings outcome accounted for the economic and financial realities being faced by the country, arising from the COVID-19 pandemic, as well as the actions undertaken by the Government to minimise the effects.

He noted that 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. The pandemic also disrupted the trend of fiscal surpluses realised over the past three years, with Jamaica programmed to post a fiscal deficit this year.

However, despite the adverse outcomes, S&P in its analysis expects the country to return to fiscal surpluses in the short term, due to the Government’s demonstrated commitment to prudent fiscal policy management.

Surpluses over the previous years supported the build-up of fiscal buffers, which aided the funding of the Government’s COVID-19 economic and social response through the COVID-19 Allocation of Resources for Employees (CARE) programme to individuals and businesses affected by the pandemic, as well as financing the health response.

“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,” Dr Clarke said.

“As such, as S&P forecasts, Jamaica is poised to return to economic growth in fiscal year 2021/22, although achieving PRE-COVID-19 levels of economic output will occur in the medium term,” he added.

S&P Global Ratings noted that if there are prolonged deficits at current high levels, or weaker external accounts due to economic recovery being weaker than expected, then there is a possibility for lowered ratings. However, consideration to revising the outlook to stable will be given if “risks of a more severe or prolonged outbreak were to subside and the country’s public finances begin returning to previous levels”.

S&P Global Ratings (previously Standard & Poor’s) is an American credit-rating agency and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is considered the largest of the big three credit-rating agencies, which also include Moody’s Investors Service and Fitch Ratings. Its head office is located on 55 Water Street in Lower Manhattan, New York, United States.