International credit rating agency Standard & Poor's Ratings Services (S & P) on Monday affirmed its “B-/B” long- and short-term sovereign credit ratings on Jamaica, stating that the island’s economic outlook “remains negative.”
The Wall Street-based firm also said Jamaica’s “B” transfer and convertibility (T&C) assessment remains unchanged.
In a statement, it said that the ratings on Jamaica reflect its high general government debt and interest burden, limited fiscal, monetary, and external flexibility; low growth prospects, and vulnerability to natural disasters due to its location in the hurricane belt.
In addition, it also reflect on the country's political stability and relatively developed domestic capital markets.
S & P said Jamaica’ s continued low growth prospects, with Gross Domestic Product (GDP) likely to expand only 1 per cent or less this year, along with a recently declining trend in the level of foreign exchange reserves, “highlight its credit weaknesses.”
It noted that the island’s general debt burden was about 126 per cent of GDP in 2011, “and we expect it to remain at a similar level in 2013.”
The rating agency said this negative outlook will continue to see the government relying on the domestic capital market, multilateral funding, and possible international issuances to finance its fiscal and external gap in the short term.
S & P said a prolonged loss of foreign exchange reserves could weaken investor confidence and raise the risk of greater exchange rate volatility, “which could exacerbate the government's already high debt burden.”
It warned that if the Portia Simpson Miller administration fails to stabilise Jamaica's external account, “the resulting further loss of external liquidity would likely lead to a lower rating.”