Consumption-Driven Growth Outlook Dampened by Downbeat External Conditions

• Fitch Solutions expects the Jamaican economy to grow by 1.2% in 2025, buoyed by increased domestic demand and continued economic recovery from Hurricane Beryl.
• Additionally, Fitch sees favourable domestic economic conditions and expected policy rate cuts by the Bank of Jamaica (BOJ) in H2 2025 as auguring well for growth in economic activity. The outlook is also supported by a record-low unemployment rate of 3.5% in Q4 2024, well-anchored inflation rates within the BOJ’s target range, and an expected 6.7% minimum wage increase and rise in the income tax threshold from J$1.7Mn to J$1.8Mn in April 2025.
• Although domestic demand will help growth recover in 2025, Jamaica remains vulnerable to external shocks and challenging global economic conditions. These external factors include flagging U.S. demand, an unpredictable geopolitical and trade policy environment, and a potentially damaging hurricane season.
• A stagnating growth outlook for the United States is a stiff headwind to Jamaica’s economy. Fitch revised its forecast for Real GDP growth in the United States in 2025 down from 2.1% to 1.9% with risks tilted overwhelmingly to the downside. The impact of a slowing US economy is sizeable for Jamaica’s entire economy, with the United States accounting for 47.2% of Jamaica’s total exports in 2023 and 40.9% of total importsFurthermore, with the U.S. now imposing a 10% tariff on Jamaica (and other countries) for all imported goods, this is likely to put a damper on the island's exports to the US and, by extension GDP growth.
• Additionally, slowing economic activity in the United States will weigh on capital spending in Jamaica, as evidenced by sharp declines in foreign direct investment inflows in 2024. Demand for foreign travel by U.S. residents has also declined, with a 2.8 percentage point decrease in the percentage of Americans surveyed in February 2025 who said they planned to visit a foreign country in the next six months, a headwind for the tourism-dependent Jamaica.
• Fitch’s growth forecast also accounts for anticipated weather-related shocks curtailing economic growth and dynamism. An initial forecast for the 2025 storm season anticipates between 13 and 18 storms, including 7-10 hurricanes, comparable to 2024’s busy storm season, which saw 11 hurricanes and 18 storms. As seen in 2024, strong storms and hurricanes can dramatically impact Jamaica’s growth prospects through supply-side shocks, with resulting spikes in inflation deteriorating the real income of the Jamaican consumer and reducing the stock of productive capital and infrastructure.

(Sources: Fitch Connect & NCBCM Research)