Keith Collister, Business Writer

The world's number three international debt rating agency Fitch has given Jamaica a 'B+/Stable' rating.

While its take on Jamaica was one notch above the rating assigned by Standard & Poor's (B/Stable) and Moody's (B1/Stable), it is still well below the coveted investment grade rating enjoyed by Caribbean competitors Trinidad and Barbados.

According to Fitch, Jamaica's ratings are supported by its political stability, its modest external indebtedness and an impressive commitment of authorities to maintain fiscal consolidation to reduce public debt despite the various external shocks the island has faced in recent years.

Like Moody's, Fitch appeared to attach a high degree of importance to Jamaica's strong consensus on macroeconomic policies geared towards reducing the public debt burden, designating a significant credit positive for Jamaica as it reduces the risk of a marked policy shift in the event of a change of government.

The agency appeared impressed that despite spending pressures and the possibility of elections in 2006, the government has been able to secure agreement on another Memorandum of Understanding with a significant proportion of public sector workers. The agreement suggests controlled growth in real wages.

Constrained

On the negative side, Fitch notes that Jamaica's ratings are highly constrained by a very high public debt burden of 130 per cent of GDP, which is twice the 'B' median, and its heavy financing needs.

In addition, public debt is highly sensitive to changes in interest and exchange rates.

Another constraint preventing a faster reduction of public debt is Jamaica's anaemic growth performance over the past decade.

According to Fitch, Jamaica's growth performance is among the worst in the 'B' category, with its 2001-2005 average growth of 1.4 per cent comparing poorly with the 4.6 per cent 'B' median.

Jamaica's growth performance is hampered by crowding out from the large fiscal deficits, a heavy public debt burden, a significant vulnerability to external and weather-related shocks, volatility in the exchange and interest rates, and a wide range of other structural constraints, such as low labour productivity, and a high crime rate.

However, growth prospects appear to be better for 2006-2008, partly owing to the expected foreign direct investment in the country.

- business@gleanerjm.com