Feb 2006 Financial News

S&P's maintains J'ca's 'B' rating

Feb 22, 2006

America's leading rating agency, Standard and Poor's, has maintained Jamaica's 'B' (stable) rating, noting that, "the ratings on Jamaica are supported by the government's ongoing commitment to fiscal discipline and debt reduction amid external shocks".

In its latest update, S&P's cited Jamaica's "higher growth prospects", boosted by strong inflows of foreign direct investments (FDIs) in the tourism and mining sectors.

"The conference level of domestic businesses and international investors remains strong (despite worse-than-expected performances in 2005), due to the government's timely and appropriate policy responses to adverse external developments," the rating agency said.

It pointed to the expected decline in Jamaica's debt to GDP ratio, to 127 per cent in fiscal 2005, compared to 133 per cent the previous year.

While improvements in the debt structure have slowed, Standard and Poor's said that "the interest cost burden is subsiding due to a decline in domestic interest rates".

Interest payments now consume 45 per cent of general government revenue, down from 53 per cent in 2004.

The rating agency expressed concern over the expiration of the public sector wage freeze, as well as Jamaica's infrastructure spending needs, saying these would put increasing pressure on the fiscal accounts. However, the agency said that higher economic growth, plus "a disciplined fiscal stance", would alleviate some of these pressures.

Real GDP growth this year is expected to be 2.5 per cent, up from 1.5 per cent in 2005.

According to a news report from JIS News, Standard and Poor's noted that despite Jamaica's deteriorating current account deficit - now nine per cent of GDP - the deficit remained smaller than other B-rated countries with a similar economic structure. Moreover, although Jamaica's trade deficit was higher than its peers with a B rating, its higher remittances act as a positive counterbalance.

Note is taken in the latest report of the close liaison Jamaica maintains with the International Monetary Fund (IMF).

"The indirect benefit of this additional surveillance (by the IMF) is an increased policy transparency domestically and abroad," said the agency. "While the targets for 2005 have been revised downward due to external shocks, the timely and transparent communication of this information to the markets helps to preserve investors' confidence in the economy."

Observer Reporter
The Jamaica Observer
Wednesday, February 22, 2006
http://www.jamaicaobserver.com/magazines/Business/html/20060221T210000-0500_99223_OBS_S_P_S_MAINTAINS_J_CA_S__B__RATING_.asp