Fitch: Jamaica's GDP Expected to Moderate Over the Medium Term  

 

• Following a robust post-pandemic recovery, Fitch Solutions expects GDP growth in Jamaica to gradually moderate over the medium term, averaging 2.4% a year over 2022-2031. Tourism and the services sector will remain key drivers of economic growth over the forecast period, with agriculture and manufacturing playing an increasingly important role.
• Household spending in Jamaica will remain by far the largest component of economic activity on the back of high remittance inflows and rising employment. While growth is forecasted, relatively weak investment will make private consumption a greater contributor to the economy.
• In the short term, consumption growth will be limited by elevated inflation and rising borrowing costs. Fitch expects that government consumption as a percentage of GDP will decline moderately over the next decade. The Jamaican government will continue to exercise fiscal restraint, adhering to IMF-prescribed policies aimed at reducing the national debt.
• In terms of Investments, gross fixed capital formation accounted for an estimated 24.0% of GDP in 2021. In the medium term, Fitch expects to see a moderate rise in investment as a share of economic output as tax reductions help spur investment, particularly in the tourism sector. Over the long term, structural weaknesses such as corruption, crime, poor infrastructure and an unskilled labour force will weigh on investment.
• For Net Exports, Jamaica will run a sizeable trade deficit throughout Fitch’s 10-year forecast period due to its dependency on imported goods. This will be partially offset by a surplus in the services balance due to tourism earnings. The country's deficit in goods and services was 14.0% of the total GDP in 2019 and increased to an estimated 20.7% of the GDP in 2021. 

(Source: Fitch Solutions)