Moody’s Sees Serious Jamaica Tests

Moody’s has put Jamaica’s B1 rating on review for downgrade amid rising pressure on the external and fiscal positions, which are expected to intensify and could further deteriorate credit risk relative to peers. “Given the severity of the ongoing global adjustment, Moody’s believes that Jamaica will be seriously tested by the severe global-crisis headwinds,” says Moody’s senior analyst Alessandra Alecci. “The public debt burden and the resources needed to service debt leave Jamaica’s small, open economy with limited leeway to cushion adverse exogenous developments.” The country’s debt burden exceeds 125% of GDP and the current account deficit could reach 20% of GDP this year as the economic slowdown in Jamaica’s key markets such as the US worsens, likely lowering remittances and tourism inflows as the year closes, adds Alecci. “The reliance on market funding at a time when the credit markets are under stress for an undetermined period of time could present Jamaica with a very difficult situation and spark a loss of confidence in the ability to access financing,” she adds. “There is a deterioration of reserves relative to imports and to the country’s external debt, leaving the authorities with limited means to prevent a potentially sharp depreciation as has occurred in other emerging markets.” In addition more than 50% of Jamaica’s public debt is exposed to foreign currency and interest rate movements. The review period could last up to three months.