Fitch Solutions Expects Policy Continuity In Jamaica

  • The center-right Jamaica Labour Party’s (JLP) sizeable victory in Jamaica’s September 3 election will improve policy enactment and ensure policy continuity in the quarters ahead.
  • Fitch Solutions noted that fiscal consolidation will remain a priority, but also noted that the government will be forced to increase expenditures in response to the domestic outbreak of Covid-19 and the slowdown in economic activity. The Bank of Jamaica (BOJ) will keep its monetary policy rate at 0.50% through end-2021 in order to boost lending amid the economic fallout from the Covid-19 pandemic.
  • External account stability is unlikely to be challenged by a sustained current account deficit in the coming years. Improved reserves, an IMF programme and capital inflows will likely be sufficient to ensure stability.
  • The Jamaican dollar (JMD) will depreciate over the coming months due to a limited supply of US dollars in Jamaica and high inflation. While the BOJ supported the value of the JMD in H2 2020, the agency expects that it will take a less active role in moderating the FX market.

(Source: Fitch Solutions)