Business

Fitch expects lacklustre Jamaica growth in 2011

Wednesday, March 02, 2011    

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JAMAICA was grouped with El Salvador, and Venezuela as countries within the region that Fitch Ratings expects will underperform, in terms of growth in 2011.

What's more, the credit ratings agency said the island nation's heavy debt burden and weak growth prospects continues to weigh down its ratings.

Jamaica sovereign credit rating by Fitch is presently at B-, which, along with Ecuador, ranked lowest among a list of 19 Latin American and Caribbean countries rated.

Fitch, in its recent report Latin America Sovereign Credit Trends, said "although Jamaica's per capita income and governance indicators surpass the corresponding 'B' medians, the country's continued heavy government debt burden and relatively weak economic growth prospects continue to weigh on its ratings.

Venezuela and Jamaica are the only countries in the region whose economies were likely to have contracted in 2010, according to Fitch.

On the other hand, "while most regional economies will decelerate, macroeconomic conditions for Latin America are likely to remain favourable in 2011 owing to rising commodity prices, healthy domestic demand dynamics and good financing conditions for the region".

Fitch projects that Latin America's real GDP will grow by 4.1 per cent in 2011, a decline from an estimated 5.6 per cent growth in 2010.

Fitch expects that economic growth will continue to proceed at multiple speeds in 2011 with continued growth dynamism in Argentina, Brazil, Chile, Panama, Peru and Uruguay.

Morevoer, the ratings agency said sovereign credit trends in Latin America could improve further in 2011 as the region continues to generally benefit from economic and policy stability.

At present, eleven countries, including Jamaica, had stable outlook, seven had postive outlooks while only one was considered negative -- El Salvador.

Fitch upgraded seven Latin America sovereigns between 2010 and present.

Jamaica was upgraded by one notch in 2010 due to the domestic debt restructuring and the subsequent IMF Stand-by Agreement.

It was because Jamaica's fiscal performance was in line with expectations and remained on track with its IMF programme why Fitch affirmed the 'B-'ratings on 8 February 2011.

"The positive sovereign credit trends in Latin America have been underpinned by the resilience of regional economies during the crisis, greater policy stability and flexibility, stronger external balance sheets, relatively modest government and external indebtedness, and further improvement in the composition of public debt," said Shelly Shetty, Senior Director and head of Latin America Sovereign ratings.

"We believe that the key policy challenges for the region are to proceed with fiscal consolidation and re-build the fiscal space in order to cope with future shocks, manage continued large capital inflows, take measures to prevent the 'overheating' observed in some regional economies, and maintain the credibility of monetary and exchange rate frameworks by responding appropriately to rising inflationary pressures," Shetty added.

Over the medium term, countries should implement measures to strengthen competitiveness to boost the business climate and investment.

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