International ratings agency S&P Global has cited Jamaica’s record of fiscal discipline as key to maintaining the country’s credit rating steady, despite the economic blow dealt by Hurricane Melissa.
But it warns that deficits and debt will rise before they fall again.
The agency also affirmed the country’s BB rating with a stable outlook.
Chevon Campbell reports.
S&P Global Ratings affirmed Jamaica’s BB long-term and B short-term sovereign credit ratings on Monday.
The outlook remains stable.
It is the first full review since December, when the agency cut the outlook from positive to stable in the wake of Hurricane Melissa.
S&P says the decision balances its confidence that the Government will manage the recovery prudently against the island’s long-standing exposure to outside shocks.
The agency projects the economy will shrink by 1.1% this year.
Melissa, a Category 5 Hurricane , struck on October 28 last year.
S&P describes it as the strongest reported hurricane to directly hit Jamaica.
The damage was heaviest in the south and west, battering agriculture and tourism, a sector S&P says accounts for as much as 30% of the economy.
As of July, about 72% of hotel operators were back in business.
Tourist arrivals in the first half of the year were down 20%.
Farmers have also been hit by drought linked to El Niño.
Still, S&P expects a rebound with growth of 3% next year and more in 2028, driven partly by reconstruction under the National Reconstruction and Resilience Authority, NaRRA.
But the agency says longer-term growth remains weak, held back by high security costs, perceived corruption, low productivity and poor competitiveness.
It projects an average growth of 1.3% over ten years below similar economies.
Meanwhile, the S&P has also flagged the public sector wage deals signed in August.
According to the ratings agency, the deals add rigidity, with the wage bill possibly reaching 13.5% of GDP by the end of fiscal 2027.
But it expects the Government would delay or defer projects, if needed, to keep the deficit in check.
Another pressure point is the estimated 58% of government debt in foreign currency, leaving it exposed to a weaker Jamaican dollar.
S&P expects that share to rise for a time, as the country draws on multilateral loans.
The current account is also expected to slip back into deficit, averaging 3.3% of GDP over the next four years, as exports fall and rebuilding imports rise.
What holds the rating up, S&P says, is Jamaica’s record.
It notes that Jamaica is the only one of the 141 sovereigns it rates to post a primary surplus above 3% of GDP in each of the past ten years.
It also points to bipartisan agreement between the JLP and PNP on fiscal discipline and expects the country to return to its 60% debt target by fiscal 2030.
The agency credits Jamaica’s layered disaster-risk framework, including contingency funds, insurance, a catastrophe bond and contingent credit, noting several of those instruments have already been re-established.
Looking ahead, S&P warns it could downgrade Jamaica within the next 12 months if the commitment to fiscal discipline weakens and debt keeps rising or if the economy fails to recover.
An upgrade could also follow a faster fiscal recovery, lower interest costs relative to revenue, and stronger-than-expected growth.
