Caribbean & Central America - February 2018 (ISSN 1741-4458)

*** POSITIVE OUTLOOK FOR JAMAICA. On 31 January, Fitch Ratings Agency affirmed Jamaica’s long-term foreign and local currency Issuer Default Ratings as ‘B’ and revised its outlook from ‘stable’ to ‘positive’. According to Fitch, Jamaica will have a primary fiscal surplus of 7.0% of GDP in fiscal year 2017/18, which will mean a balanced budget.

Also on 31 January, Jamaica’s national statistics institute (Statin) reported that unemployment had declined to 10.4%, the lowest level since October 2008. Youth unemployment, at 25.4%, was also the lowest since 2008. This is good news for the Jamaica Labour Party (JLP) government led by Prime Minister Andrew Holness almost exactly two years after it secured an unexpected one-seat victory over the People’s National Party (PNP). However, it is still a long way short of what the JLP promised in its election campaign.

In its manifesto for the February 2016 general election, the JLP promised to create over 200,000 new jobs, including 10,000 from urban renewal in Kingston; 30,000-40,000 “over the next 5-7 years” in Business Process Outsourcing; 15,000-25,000 in construction of an “integrated multi-modal transport system”, with the same again to be created in logistics and tourism after completion; 20,000 in manufacturing and agri-business; 30,000 in the expansion of the hotel industry; 20,000 through the creation of small businesses; and 50,000 in the development of Jamaica’s ‘Sun Coast’ (from Port Royal to Morant Point), with 30,000 permanent jobs on completion of the project in such things as maintenance, landscaping, housekeeping, and management services.

The latest Statin report shows that the number of persons employed in October 2017 was 1,206,800, 27,300 more than in October 2016. It is a start, but there is still a long way to go.

*** IMF COMPLETES BARBADOS CONSULTATION. The International Monetary Fund (IMF) concluded its latest Article IV consultation with Barbados on 26 January. The headline finding is that economic growth is slowing following the recovery in 2016. GDP growth was 1.6% in 2016, but it is estimated to have slowed to just 0.9% in 2017 and it is projected to slow further to 0.5% in 2018 “due to the ongoing fiscal adjustment and policy uncertainty related to the forthcoming elections”.

On the positive side, there has been a decline in the fiscal deficit to 5.5% of GDP in FY2016/17, and this should fall further to 4.1% of GDP in FY2017/18. However, this is less of an improvement than planned due to a shortfall in revenues and higher transfers to state-owned enterprises (SOEs). Central government debt at end FY2016/17 was 137% of GDP. The IMF noted: “The larger than expected fiscal deficit is increasing funding challenges”.

For the IMF, the priority is “a comprehensive restructuring of SOE operations”, which it sees as “critical to address[ing] the structural imbalance in the public sector”.

None of this is good news for the Democratic Labour Party (DLP) government, led by Prime Minister Freundel Stuart, which has to face the electorate by the end of June this year. The DLP is coming to the end of its second term in power, having clung on for a second term with a 16 seat to 14 seat victory over the Barbados Labour Party (BLP) in 2013.

There is a long-established trend in Barbados of the electorate awarding lengthy alternating periods of power to each of the country’s two main parties. It seems all but certain that the BLP is about to get another turn.