Fitch Revises Jamaica's Outlook to Stable; Affirms IDR at 'BB-'

  • Fitch Ratings has affirmed Jamaica's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' and revised its Outlook to Stable from Positive.
  • The Outlook revision reflects the significant damage inflicted on Jamaica from Hurricane Melissa, which we expect to lead to an economic contraction and require significant reconstruction costs. Fitch expects the economy to contract in 2025, with significant uncertainties around the pace of recovery, given adverse effects that could linger for key sectors like tourism, agriculture and mining. Economic contraction and fiscal deficits are expected to interrupt the prior strong downward trend in government debt/GDP, which is still above the 'BB' median and vulnerable to changes in the exchange and interest rates.
  • The rating affirmation and Stable Outlook also reflect mitigating factors to the major hurricane shock, including insurance and contingency funds (combined totals at nearly US$250Mn), multilateral lines of credit (at nearly US$384Mn), and expected large private insurance flows (estimated insured damages range from US$1Bn-US$2.5Bn.
  • Additionally, Fitch expects Jamaica's foreign reserve position to remain healthy, aided by increased remittance inflows, strong relations with international financial institutions and a benign debt amortisation profile for the next few years. Despite considerable uncertainty regarding the impact of Hurricane Melissa, Fitch sees headroom at the current rating to accommodate negative economic growth and fiscal metric implications.
  • Fitch projects a 1.5% economic contraction in 2025 with a modest 1.8% rebound in 2026; tourism receipts may fall ~15% annually and could worsen if major hotels stay closed past Feb-2026, though rising remittances (16% of GDP in 2024) will partly offset losses. The government’s suspension of the Fiscal Responsibility Law will push the fiscal balance from a 0.2% surplus in FY2024 to a 3.2% deficit in FY2025 and wider in FY2026 due to reconstruction, driving debt/GDP up toward ~68% by end-2026.
  • The current account is expected to shift from a 3.1% surplus in 2024 to a deficit in 2026 as tourism and mining weaken while imports surge, though Jamaica’s floating FX regime and strong reserves (6.6 months of external payments) offer buffers. Jamaica’s BB- rating is underpinned by strong governance indicators, moderate inflation, and past fiscal reforms that cut debt from 135% in 2012 to 64.7% in FY2024, though crime and climate-related storm and flood risks remain key structural challenges.
  • A downgrade could occur if Jamaica experiences a significantly weaker or slower-than-expected post-hurricane economic recovery, or if new external shocks cause a substantial deterioration in public finances or external liquidity.
  • However, an upgrade could occur if the government achieves a sustained decline in debt-to-GDP and interest burdens, and if economic damages are lower or the recovery is faster than currently expected.

(Source: Fitch Ratings)