Large Majority to Support Policymaking in Jamaica, Though Pandemic Poses Risks To Ruling Party's Popularity.

• According to Fitch Solutions, the JLP’s large majority has facilitated policymaking in recent quarters, including the smooth passage of a supplementary budget on October 12 that boosted emergency spending on the COVID-19 pandemic by JMD33.0Bn, equivalent to 5.6% of current expenditures in FY2020/21. The supplementary budget included cash transfers to those unemployed due to the pandemic and to incentivize vaccinations, food support and a bonus for healthcare workers. 
• While the supplementary budget will increase spending in FY2021/22 by 4.0%, Fitch maintains its view that the government will pursue fiscal consolidation in the medium term for three reasons. Notably, it expects the public debt will rise to 108.6% of GDP by end-2021 and that with limited access to international capital markets, the government will have to curtail spending. Despite austerity being politically unpopular, Fitch sees the government initiating fiscal consolidation in the medium term for two reasons. Firstly, throughout Jamaica’s two IMF programmes from 2013 to 2019, there was cross-party buy-in for reducing government spending and public debt. Secondly, elections are not constitutionally mandated until September 2025, giving the government several years to rein in spending before it faces voters. 
• That said, Fitch is revising down Jamaica’s score in its Short-Term Political Risk Index (STPRI) to 72.3 out of 100, from 74.2 previously, as a slow vaccination programme, and elevated inflation, unemployment and crime are raising risks to social stability. With only 19.2% of Jamaicans having received at least one dose of a COVID-19 vaccine as of October 19, Jamaica’s vaccination programme significantly lags other major Caribbean markets due to a limited supply and persistent vaccine hesitancy. 
• In addition, Fitch sees rising risks to social stability amid elevated inflation, unemployment, and violent crime pose. Inflation reached 6.1% in August, above the upper bound of the Bank of Jamaica’s 4.0-6.0% inflation target. Fitch forecasts that inflation will remain high in the quarters ahead, averaging 6.0% in 2022, the high end of the BOJ’s target range. At the same time, unemployment averaged 9.0% in Q221, above the 7.3% seen before the pandemic in Q120. The combination of elevated unemployment and erosion of household purchasing power increases the possibility of widespread protests against economic conditions.

(Source: Fitch Solutions)