Slow Tourism Recovery to Weaken Jamaican Dollar in the Short-Term

• The Jamaican Dollar (JMD) will continue to weaken against the U.S dollar (USD) in 2021 as the country’s domestic tourism industry faces a slow recovery, which will limit USD inflows. 
• However, over the long-term, a stronger outlook for growth and tourism will limit the JMD’s depreciation, but elevated inflation, dovish monetary policy and persist current account deficits will keep the unit on its long-range depreciatory path. 
• Fitch Solutions has revised its 2021 average forecast for the Jamaican Dollar to JMD$150.50/USD, from JMD$149.90/USD previously, as it expects weaker tourism activity will keep the unit in a weaker trading range in the near term. The revised forecast implies that the unit will trade 5.7% below the JMD$142.40/USD average in 2020. 
• However, barring another spike in COVID-19 cases, we expect the gradual recovery witnessed in the tourism sector thus far to strengthen in H2 2021 supported by the robust vaccination programmes and economic recovery in source markets, to influence greater USD inflows and reduce the pace of depreciation of the JMD.

(Source: Fitch Solutions & NCBCM Research)