JIS News

One of America’s leading financial institutions, Morgan Stanley, has expressed the view that “in spite of all remaining challenges”, the Jamaican economy is moving in the right direction.
Morgan Stanley says the country is moving into a “virtuous cycle in which lower interest rates lead to lower debt service, lower debt ratios, lower funding costs, higher growth and ultimately a better credit quality”.
In an Emerging Markets report on Jamaica issued yesterday (August 16) and titled, ‘Virtues of a Virtuous Cycle’, the highly reputable investment analysts joined a growing list of agencies and institutions, which have issued positive assessments of the Jamaican economy.
“Following our meetings in Kingston with a wide range of policymakers and key stakeholders in the Jamaican economy, we believe that Jamaica is on an improving credit trajectory,” Morgan Stanley notes.
In its 14-page report, the institution says that “in spite of all the risks, the Jamaican economy has proven to be resilient”. The institution says the Government’s target of a fully balanced budget for this fiscal year is a reachable, though challenging one, given the recent hike in inflation.
Morgan Stanley says the growth in inflation might increase the risk of missing the fiscal targets this year. “We have incorporated such risks in our own assumptions, under which Jamaica is a stable to improving credit, which offers some of the highest spreads in the asset class.”
The Bank of Jamaica is praised for its effective management of foreign exchange volatility, and it is noted that over the years the country has made “good progress” with regard to improving financial regulation.
“Compared to countries with similar ratings, Jamaica’s institutions are relatively strong and transparent,” says the investment analysts.
Morgan Stanley refers to the strong foreign direct investment (FDI) inflows as well as the projected US$4 billion of committed FDIs. “This, together with the important infrastructure investments, should guarantee a high level of FDI inflows and has the potential to lead to stronger growth in future years,” Morgan Stanley adds. The report says that Jamaica’s US dollar bonds have outperformed more actively traded names such as Brazil, Venezuela and the Philippines since the beginning of the year.
The report also speaks of “upbeat local investor sentiment”, and refers to the fact that remittances by Jamaicans living abroad have grown more than 15 per cent on average over the past five years. At US$1.4 billion, the report notes, remittances provide an important source of foreign reserves and function as a social safety net.
Among the risk factors, which the report mentions, are the high crime rate, the high debt burden, current account imbalances, natural disasters and commodity price increases, such as oil. “The Government’s commitment to balance the budget remains firm, even in spite of the recent uptick in inflation and the early onset of the hurricane season”.