Sharp Contraction In Exports Will Produce Deep Recession In Jamaica

• According to Fitch, the Jamaican economy will contract by 5.1% y-o-y in 2020, from -2.6% previously, as the Covid-19 pandemic halts tourism activity and exacerbates the contraction in bauxite production.
• A 5.1% contraction would be deeper than Jamaica’s 4.3% contraction in 2009 during the global financial crisis and would be its largest recession since 1980. In particular, Fitch expect sizeable declines in the tourism and mining industries, which accounted for 9.2% and 3.4%, respectively, of GDP in 2018.
• The coronavirus pandemic will exacerbate the contraction in Jamaican goods exports. Bauxite, which accounted for 62.7% of goods exports in 2019, is mined for its high aluminum content. However, both price and volume effects will undermine Jamaica’s mining sector.
• At the same time, the sustained spread of Covid-19 in key source markets will lead to a steep decline in Jamaican tourism activity and service exports. The coronavirus pandemic has led to extended lockdowns and steep contractions in the US and UK, which accounted for 68.6% and 11.9% of total arrivals to Jamaica in 2019, respectively.
• An estimated 160,000 workers in the tourism industry, equivalent to 11.7% of Jamaica’s total labour force, have been laid off since March. Fitch expect unemployment to average 13.0% in 2020, up from 7.3% in January 2020.

(Source: Fitch)