Fitch raises worries about Jamaican economy
Damion Mitchell, News Editor
The Gleaner/Power 106 News Centre
International ratings agency Fitch has maintained Jamaica’s B- grade on its likelihood to honour is local and foreign debts.
However, Fitch is raising grave concern about Jamaica’s high debt ratio and what it calls structural weakness, crime and the high cost of energy.
Fitch released its latest rating on Jamaica last evening.
Last evening, the finance ministry issued a three-paragraph release, highlighting that Fitch has affirmed Jamaica’s rating at B- with a stable outlook.
The finance ministry said the ratings are supported by improving macro-economic stability and Jamaica’s high level of institutional strength.
However, the full report on the Fitch website is not as rosy as the ministry’s press release.
The Fitch report reinforces a worrying reality for the Jamaican economy, highlighting the need for urgent improvement.
According to the Fitch report, there exist key credit weaknesses in Jamaica.
It said Jamaica has one of the highest debt burdens of all sovereign countries rated by Fitch.
At the same time, Fitch said there are weak external and fiscal solvency indicators, continued growth underperformance, and high vulnerability to external and confidence shocks.
Fitch has taken note of the pronouncements by the new PNP administration that it intends to negotiate a new agreement with the IMF, reign in expenditure pressures, contain public sector salaries and pension costs, and reform the tax system.
Fitch is warning that maintaining the credibility of Jamaica’s fiscal policy and multilateral support will be key.
Financial analyst Dennis Chung said based on the Fitch report Jamaica is still at a vulnerable stage.
In the meantime, Fitch has forecast that Jamaica's central government deficit will see a one percentage point cut this fiscal year from 6.2 per cent to 5.2 per cent.
However, Fitch maintains that the Government’s financing needs, at 16 per cent, are among the highest in the 'B' category.
Fitch has recommended continued fiscal consolidation and higher economic growth that ensures medium-term debt sustainability and a further reduction in Jamaica’s external vulnerabilities.