On 1 March, the Jamaican electoral commission announced that the Jamaica Labour Party (JLP) very narrowly defeated the incumbent People's National Party (PNP) in the general election held on 25 February 2016. In a ballot characterised by a historically low voter turnout, the JLP secured 50.2% of popular support and 32 out of 63 seats in Parliament. The PNP managed to hold on to the remaining 31 seats, yet that implies a significant loss compared to the 42 seats it held since the previous election in 2011. Both voter fatigue and the reduced PNP popularity to a large extent reflect continued economic weakness in Jamaica. Indeed, while the previous government under Portia Simpson-Miller was praised for its commitment to fiscal consolidation and structural reforms in line with the IMF-supported programme in place since 2013 (the primary fiscal surplus rose to more than 7% of GDP and total public debt fell from 145% of GDP in 2012 to 125% in 2015), its policies did not bear fruit in terms of tangible economic recovery. Growth failed to pick up after a prolonged recession ended in 2013 (with GDP virtually stagnating in fiscal year 2014 and expanding by barely 1.5% in 2015) and the unemployment rate remained elevated (estimated at 12% in 2015). In this light, it is unsurprising that JLP campaign promises of lower taxes and job creation resonated relatively well with voters.

Impact on country risk

Despite its electoral advance and the regaining of power after four years in opposition, it is clear that the JLP does not face a honeymoon. In particular, it remains to be seen if its plans to boost the economy are compatible with continued adherence to the ongoing IMF programme. While the new government of Prime Minister Andrew Holness (who already briefly served in that position in late 2011) has pledged to keep good relations with the IMF, it is worth noting that the previous JLP government saw an IMF agreement stalled due to fiscal largesse. Another contentious issue for the new government pertains to its narrow legislative majority. Indeed, policymaking will likely be complicated by fragile support in Parliament. On the upside, benign external conditions such as low oil prices and the growth recovery in the United States are expected to continue to benefit the Jamaican economy for some time to come. Analyst: Sebastian Vanderlinden, s.vanderlinden@credendogroup.com