Jamaican 2024 Growth Disrupted By Hurricane Beryl, Rebound In 2025

• Following the damage caused by Hurricane Beryl in early July, Fitch Solution is lowering its 2024 real GDP growth forecast for Jamaica from 2.4% to 0.5%. In 2025, Fitch expects that growth will come in at 2.3% – compared to 1.3% between 2015 and 2019 before the pandemic.
• Initial Q2 real GDP growth data has disappointed, coming in at 0.1% y-o-y, according to the Planning Institute of Jamaica (PIOJ). Through H2 2024, Fitch Solution expects quarterly growth to average 0.2% y-o-y driven by a slowing US economy. Given that tourism accounts for around 25% of employment and 30% of GDP, a slowing US economy - a key supply market - will weigh tourist arrivals and visitor expenditure. Fitch Solutions’ views on the US economy are that it will lose momentum around Q4 2024 continuing through early 2025.
• Additionally, weighing on growth in 2024 will be the effects of Hurricane Beryl. The UN found that the hurricane caused US$12Mn of infrastructure damage and US$15.9Mn of farmland damage.
• Notwithstanding the disappointing growth, Fitch Solutions expects that Jamaica’s GDP Growth will rebound in 2025, supported by net exports, contributing 0.8 percentage points (pp) to its growth forecast and a rebounding tourism sector in 2025. As US economic activity increases, Fitch anticipates higher discretionary spending on travel. Consequently, Jamaica is poised to see a significant uptick in tourism arrivals, which will drive growth in the hospitality sector.
• Additionally, the relaxed monetary policy, especially the 50 basis point (bps) reduction by the Fed, is expected to create a favourable global investment climate. Fitch expects this outcome would support a 0.2pp increase in investment to Jamaica as the US economy picks up in H2 2025.
• The risks to the forecast are generally balanced. Fitch maintains its core outlook that the US economy will slow between the second half of 2024 and the first half of 2025. However, there is a possibility that growth could exceed expectations, particularly if there is stronger consumer spending driven by the Fed's easing policies. Should US growth outperform Fitch’s projections, Jamaica is likely to benefit from increased tourism and remittances.
• On the downside, Jamaica, like many other Caribbean nations, faces inherent risks from natural disasters. Coupled with the effects of climate change, an extreme weather event could adversely affect tourism and the manufacturing of export-oriented goods.

(Source: Fitch Solutions)