Renewed Tourism Activity to Accelerate Jamaican Recovery in Quarters Ahead
- Relaxed COVID-19 restrictions and a rebound in tourist arrivals will drive Jamaica’s economic recovery in the quarters ahead. The Jamaican economy has steadily recovered from the economic shock caused by COVID-19, which brought the tourism industry to a near-complete halt from Q220 to Q420, as restrictions on international travel have begun to loosen.
- Real GDP grew at a seasonally adjusted rate of 0.6% q-o-q in Q121, despite a surge in COVID-19 cases in February and March that prompted the government to impose stringent restrictions on mobility and commercial activity.
- The rebound in the tourism industry will boost service exports and investment and bolster private consumption through renewed employment growth. The return of tourism activity will boost employment, fueling private consumption growth of 4.0% in 2021.
- The tourism industry historically accounts for approximately 30.0% of total employment in Jamaica. As a result, Fitch Solutions expects job growth to accelerate as arrivals rebound. The unemployment rate averaged 9.0% in Q121, below the 12.6% seen in Q320 but still above the average of 7.7% in 2019.
- Unemployment is forecast to decline over the course of the year, averaging 7.8% in 2021, which will bolster household incomes and private consumption. Private consumption accounted for an average of 77.9% of GDP from 2015 to 2019.
- This has led to the upward revision of 2021 and 2022 real GDP growth forecasts to 4.5% and 4.1% respectively, from 3.0% and 3.5% previously, as economic output in the year through July have surprised to the upside. The economy’s continued growth in Q121 suggests that it is more resilient to pandemic-related disruptions than Fitch had previously expected, underpinning its upward revision of real GDP growth forecast.
- However, the entity’s forecast implies that the economy will not return to its pre-pandemic size until 2024. Limited fiscal support and the continued global spread of COVID-19 will slow the economic recovery.
(Source: Fitch Solutions)