On the Edge: Fitch maintains Jamaica's BB- rating but cites crime and deep structural weaknesses

Fitch Ratings has kept Jamaica’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ’BB-’, with a Positive outlook. This affirmation reflects Jamaica’s stronger governance, substantial progress in debt reduction, a robust fiscal framework, and a firm political commitment to achieving large primary surpluses.

Jamaica’s debt-to-GDP ratio has decreased to an estimated 70.8 per cent in fiscal 2024/2025, down from a peak of 135.3 per cent in fiscal 2012/2013. However, the ratings are still limited by deep structural weaknesses, including a high crime rate, low productivity, weak demographics, and susceptibility to external shocks, including those related to weather.

Fitch’s Positive Outlook is based on the expectation of continued improvement in debt metrics and further strengthening of the policy framework over the next few years, including measures to mitigate climate risk.

Despite the economic downturn last year caused by Hurricane Beryl and extensive rain, the overall surplus in the fiscal year ending in March 2025 is projected to be slightly better at 0.3% of GDP than fiscal year 2023/24 at 0.0% of GDP. This is partially due to one-time revenues from insurance payments and concession proceeds from airports.

Fitch anticipates these large primary surpluses will reduce general government debt GDP to 66.3% of GDP in fiscal year 2025/26 from 70.8% this fiscal year. Debt is expected to fall to 63.5% in fiscal 2026/2027, putting it on track to meet the government’s debt target, although the 60% target is still higher than the current ’BB’ median of 55.6%.

Jamaica has remained committed to an economic policy framework built on two key pillars: Bank of Jamaica’s (BoJ) inflation-targeting monetary policy and fiscal policy anchored on debt reduction targets. The policy framework proved flexible enough to cope with the recent shocks without undermining medium-term fiscal and inflation expectations.


Inflation fell to 5%, the midpoint of the BOJ’s target range, at year-end 2024. The BoJ has enhanced its credibility over the last four years since gaining full independence in 2021 by hiking policy rates proactively, by a cumulative 650 basis points, when inflation began to spike in late 2021.

Jamaica faced a 3.5% GDP decline in 3Q24 yoy due in large part to the damages caused by Hurricane Beryl in July 2024. A tropical storm and continuous rains further dented growth in 4Q24 with growth falling a further 0.7%. Adverse weather especially hurt the agriculture and construction sectors. The mining sector also suffered as damages to the ports halted exports of alumina.

Jamaica’s current account moved to a surplus position in 2023, reaching 2.9% of GDP. Fitch estimates that the surplus narrowed to 1.3% of GDP in 2024, and we expect it to continue to narrow in 2025-26 but remain in a small surplus position. Foreign direct investment is expected to average close to 3% of GDP as well.

Jamaica’s external balance sheet has continued to improve. Net sovereign external debt is forecast to fall to below 10% of GDP this year from a high of 41.6% in FY 2015/2016 because of deleveraging and a significant buildup in international reserves. Official net international reserves increased by nearly USD825 million in 2024 to USD5.6 billion by year-end.

The banking sector is well capitalized, and non-performing loans remained at low levels. As of September 2024, the capital adequacy ratio was 14.5%, well above the regulatory requirement of 10%, and the NPL ratio was 2.4%, below the five-year pre-pandemic average.

Fitch’s SRM assigns Jamaica a score equivalent to a rating of ’BB-’ on the Long-Term Foreign-Currency (LT FC) IDR scale. The Country Ceiling for Jamaica is ’BB’, 1 notch above the LT FC IDR. This reflects moderate constraints and incentives, relative to the IDR, against capital or exchange controls being imposed that would prevent or significantly impede the private sector from converting local currency into foreign currency and transferring the proceeds to non-resident creditors to service debt payments.

Article source Investor.com