International credit-rating agency Moody's Investors Service on Tuesday announced that it has affirmed the Government of Jamaica's long-term issuer and senior unsecured ratings at B2, while maintaining a stable outlook.
The agency said its rating reflects “Jamaica's strong commitment to fiscal consolidation” despite expectations of an increase in the country's debt over the short term.
“Low growth, limited diversification and the small size of the economy are structural factors that constrain Jamaica's economic and credit prospects,” Moody's added.
Notwithstanding, it expects that the country's debt will begin to decrease by March 2022, due to an improvement in tax collection and expected dividends from the Bank of Jamaica. Even without the dividends from the central bank, the credit-rating agency expects that reduction in curfews and lockdowns, as well as “the normalisation of economic activity” will contribute to a recovery in revenues to pre-pandemic levels in the next fiscal year.
Moody's forecast of an increase in debt is similar to that of Fitch Solution, which, in a note last month, predicted an increase in public debt by the end of the calendar year
Overall, the agency said it expects a “subdued recovery” given the country's dependence on the tourism sector's direct and indirect contributions to economic activity. However, the agency indicated that “a steady and extended recovery in tourism is sufficiently strong to assure a return to pre-pandemic GDP growth rates” and could result in a rating upgrade.
The performance of the tourism industry also factored into Moody's stable outlook on Jamaica's economy, as it stated: “The stable outlook reflects balanced risks to the rating. The pace of economic recovery will be tied to the outlook for the tourism sector, while the economy will remain vulnerable to weather-related shocks.”
In addition, Moody's said that the outlook also hinged on the Government's continued adherence to medium-term debt targets.
In response to the agency's disclosure, Minister of Finance and the Public Service Dr Nigel Clarke said, “Moody's decision to affirm Jamaica's credit rating and to maintain the outlook as stable, despite the sharp increase in our debt ratio as a result of the pandemic, is demonstration of confidence in Jamaica's fiscal programme, our economic recovery and belief in the resilience of our economy.”
The agency's affirmation of Jamaica's B2 rating and stable outlook contrasts with its downgrade of Trinidad and Tobago's rating from Ba1 to Ba2 last Friday. Moody's also changed its outlook from stable to negative, but subsequently restored the outlook to stable.
According to a report from Trinidad Express, since the downgrade Trinidad and Tobago Finance Minister Colm Imbert has said that country's Government is “certainly prepared to heed” the advice of the International Monetary Fund that “policy attention should focus on reducing public debt levels and rebuilding fiscal buffers”, once the economic recovery is firmly in place.