Standard & Poors upgrade of Jamaicas credit rating will help to boost confidence levels in the markets, according to President or the Jamaica Securities Dealers Association, Julian Mair.
He said the upgrade was reflective of the first quarter review of the targets set under the agreement with the International Monetary Fund. "It is a pleasant surprise and it will help to boost the confidence levels in the markets," Mair said, responding to queries from Business Online.
Vice President of Business Analytics, Portfolio Advisory and Product Development at Scotia Investment, Jason Morris echoed those sentiments, saying that the upgrade is good for us and it will add another layer of confidence", even as he cautions against complacency. And the Private Sector Organisation of Jamaica (PSOJ) said it welcome S&Ps announcement and that it was pleased with the progress being made under the IMF programme.
We remain steadfast in our belief that with the continued commitment to discipline, reform programmes and support for private sector-led growth, the country will soon see the fruits of the sacrifices being made, the PSOJ said in a release.
However, the organisation said there was need for vigorous and urgent implementation of all growth inducing measures, such as the reform of the planning approval process and comprehensive tax reform, to ensure that the foundation is laid for private sector-led growth and in order to negate the contractionary effects of the necessary fiscal reforms.
Staying the course will no doubt result in even further upgrades from all the rating agencies and as usual the PSOJ stands ready to assist in this process, the release said.
S&P this week raised its long-term foreign and local currency ratings on Jamaica to B- from CCC+ and its short-term foreign and local currency sovereign credit rating to B from C.
"The stable outlook reflects our expectation that the government will largely meet its ambitious fiscal targets this year while advancing its tax reform agenda and avoiding a fall in foreign-exchange reserves," the rating agency said.S&P also said it expected the current account deficit to decline to 10 per cent of GDP in 2013from 12.6 per cent in 2012 and even lower in 2014.
Additionally, there is the expectation that external capital will limit pressure on the foreign exchange reserves.
"Failure to meet fiscal and debt targets could weaken investor confidence, placing pressure on the exchange rate ... and potentially lowering the country's foreign-exchange reserves, S&P said.The resulting fall in external liquidity and the country's growth prospects could result in a downgrade.
Conversely, adherence to the government's ambitious fiscal targets and reform agenda, as well as improving external liquidity, could bolster investor confidence and contribute to better GDP (Gross Domestic Product) growth prospects," S& P added.
S&P said the upgrade reflected recent progress in the government's attempt to stabilize the economy, staunching the loss of foreign-exchange reserves and gaining access to new external funding, all contributing to reduced risk of near term default.
The upgrade was also based on the various reforms that the government has been undertaking.On the other hand, the rating agency said the country's ability to service its debt remained vulnerable to sharp fluctuations in the exchange rate and interest rates, as well as fiscal slippage and lower than expected GDP growth.