Tourism Rebound In H2 2021 Will Drive Jamaican Recovery

• Robust COVID-19 vaccination programs in key source markets will power a strong rebound in Jamaica’s sizeable tourism industry in H2 2021.
• The resumption of flights from major airlines such as Virgin Atlantic, British Airways, and Frontier to Jamaica as early as May 28, and the sizeable fiscal stimulus in the US, which accounted for 68.6% of stop-over arrivals in 2019, will further bolster tourism demand.
• In addition to boosting service exports, the turnaround in the tourism industry will build on recent employment growth, fueling private consumption. Private consumption, which accounted for 76.2% of GDP in 2019, is expected to grow by 3.2% y-o-y in 2021 as businesses in the tourism sector re-hire workers. Unemployment is forecasted to average 8.0% in 2021, down from 8.9% at end-2020, which should boost household incomes, and thereby private consumption growth.
• A brightening growth outlook and loose monetary policy will support investment growth of 3.0% y-o-y in 2021. The brightening economic outlook should boost business confidence in the quarters ahead, which will lead to a rebound in investment. Moreover, the expected return of tourism activity will likely further incentivize investment.
• Fitch Solutions has revised its 2021 real GDP growth forecast to 3.0% y-o-y, up from 2.5% previously, as the widespread availability of COVID-19 vaccines in source markets will lead to stronger tourism demand than previously expected.
• The continued spread of COVID-19 poses downside risks to Jamaica’s growth outlook. The government has so far relied on donations from wealthier nations and the COVAX facility. As a result, Fitch Solutions does not expect Jamaica to vaccinate all priority populations until 2022. This will leave the population vulnerable to additional outbreaks of the disease, which would likely prompt the government to re-impose restrictions on mobility and commercial activity.

(Source: Fitch Solutions)