Bear Stearns Upbeat on Jamaica

The reputable New York-based sovereign risk analysts, Bear Stearns, yesterday (July 20) issued another upbeat report on Jamaica’s economy, noting that “fiscal results for April and May were in line with expectations, and are on track to meet the Government’s balanced budget goal of fiscal year 2005-2006”.
Bear Stearns expressed the view that tax revenues would show “greater increases in the coming months, as tax measures that took effect April-June take hold”. The firm noted that the net result on revenues and grants for the first two months of the fiscal year – April and May – were $260 million ahead of the target. Bear Stearns commented favourably, too, on the fact that Government expenditures for April and May were $2.024 billion below budget, or 3.7 per cent lower in nominal terms than the corresponding period last year.
“Significantly lower interest payments, as well as wage restraint, allowed the Government to increase spending on programmes and capital projects. We view this as a very healthy realignment of expenditures that would be positive if upheld,” Bear Stearns said.
The firm echoed sentiments also expressed by the International Monetary Fund (IMF), which recently commended Jamaica’s macro-economic achievements.Bear Stearns observed that the Government’s deficit of $5.198 billion for the first two months of the fiscal year was “significantly better” than the first two months of last year.
The most important constraint on Jamaica’s medium-term outlook, the firm expressed, was the island’s huge debt burden. But they noted that the Government had embarked on “an aggressive fiscal deficit reduction strategy that involves public sector wage restraint, interest rate reduction, reduction in tax evasion and tax increases”. The New York-based firm in its ‘Sovereign Latin America’ update on Jamaica, highlighted the stability of the Jamaican dollar as well as the high business confidence expressed in recent surveys of the Jamaica Conference Board, a private sector grouping. But it noted that consumer confidence was falling. “Consumers may be less forward-looking and more sensitive to inflation – which has remained high -hurricanes and other natural phenomena as well as tax increases in the latest budget.”
With regard to business confidence, the sovereign risk analysts concluded that “businesses may be more in tune with the improving policy fundamentals as well as the foreign direct investment (FDI) pipeline that ought to be positive for future growth prospects”.