Jamaica

Jamaica continues its recovery following hurricane Melissa

Jamaica is expected to return to growth in 2027 after a period severely disrupted by natural disasters, including Hurricane Melissa, the most recent event, which caused damage estimated at more than USD 12 billion (55% of GDP) in October 2025. Growth should be driven primarily by reconstruction efforts, which are supporting public spending and investment. To achieve this, the island can rely on approximately USD 6.7 billion in financial support over three years from multilateral organisations and regional development banks, in addition to insurance payouts. Economic growth should also benefit from the gradual recovery of tourism (around 35% of GDP in 2025), which contracted by 25% year-on-year in the first half of 2026 after the hurricane struck the western part of the island, where 90% of tourism facilities are concentrated.

The normalisation of the mining sector, whose infrastructure was also damaged by the hurricane, should likewise contribute to the economic rebound. Jamaica is the world's seventh-largest producer of bauxite, while alumina accounted for the country's leading export product (35% of total exports in 2025). The sector is receiving significant investment, with Chinese conglomerate JISCO planning to spend USD 490 million by 2028 to rehabilitate the Alpart alumina refinery, which has been closed since 2019. Nevertheless, external trade is expected to remain a drag on growth due to rising reconstruction-related imports and a higher energy bill, as oil prices (representing 25% of imports in 2025) depend heavily on developments in the Middle East conflict. Food imports are also expected to remain elevated as Melissa severely affected agriculture, which is now threatened by the return of the El Niño climate phenomenon.

Assuming the abovementioned shocks gradually subside, inflation is expected to slow in 2027 and return to the Bank of Jamaica's (BoJ) target range of 4% to 6%. However, the central bank is likely to maintain a cautious monetary policy in order to preserve a favourable interest rate differential with the US Federal Reserve (Fed). This environment should support private consumption, which is also underpinned by remittances from the Jamaican diaspora (15% of GDP in 2025). More broadly, the country's growth prospects are expected to remain highly dependent on the US, which is Jamaica's main trading partner and foreign investor, as well as the primary destination for emigrants and the main source of tourists. Nevertheless, climate-related risks remain the most serious threat to the country's economic outlook, as warming oceans are increasing both the frequency and intensity of tropical cyclones.

Hurricane Melissa reshapes Jamaica’s fiscal and external accounts

Exempted from its fiscal rules for an additional year to finance post-hurricane reconstruction spending, Jamaica’s public finances are expected to continue deteriorating during fiscal year 2026-2027 (1 April 2026 to 31 March 2027) despite the persistence of a small primary surplus. The cumulative fiscal impact of the disaster is estimated at around 5% of GDP over the 2025-2030 period. After rising sharply in the wake of the hurricane, government expenditure (33.8% of GDP in FY2025-2026) is expected to stabilise, while revenues (30.3% of GDP) continue to decline. More specifically, planned tax increases amounting to 0.8% of GDP (USD 190 million) would be more than offset by lower non-tax revenues, mainly reflecting the expiry of exceptional multilateral financing previously recorded under this category. The situation also allows the government to draw up to 0.3% of GDP (USD 75 million) from the National Housing Trust to help meet financing needs. Overall, the budget deficit is expected to be financed primarily through greater issuance of domestic debt in local currency, alongside concessional loans from multilateral institutions. As a result, the share of domestic debt in total public debt (44% in 2026) is expected to increase. This trend is consistent with Kingston’s strategy of issuing more Jamaican-dollar-denominated bonds in order to reduce exposure to foreign exchange risk. Ultimately, addressing the aftermath of Hurricane Melissa is expected to delay the objective of reducing public debt below 60% of GDP until beyond 2030.

Jamaica’s external position, which deteriorated significantly following Hurricane Melissa, is expected to begin recovering from 2027 onward. Although the current account is likely to remain in deficit, it should benefit from the gradual recovery of tourism and the rebound in merchandise exports, including alumina, fuels and rum, together with a moderation in the energy bill and reconstruction-related imports. At the same time, remittance inflows from expatriates are expected to remain strong, partially offsetting the trade balance deficit. The current account deficit should be financed through concessional multilateral funding as well as sustained levels of foreign direct investment. Foreign exchange reserves, equivalent to almost seven months of imports as at July 2026, are expected to remain at a satisfactory level, providing the central bank with sufficient room to intervene in the foreign exchange market if necessary and maintain the gradual depreciation of the Jamaican dollar.

Reconstruction, security and closer ties with Washington are linchpins of the political agenda

Jamaica benefits from a relatively stable institutional and political environment. Re-elected for a third five-year term in September 2025, Prime Minister Andrew Holness of the Jamaica Labour Party (JLP, centre-right) nevertheless holds a narrower parliamentary majority than before (35 out of 63 seats). However, the situation is unlikely to prevent him from implementing his reconstruction and economic consolidation agenda. While corruption and the cost of living are ongoing concerns, the cost of living is far more likely to trigger social unrest, as inflation remains a key issue for the population. Above all, maintaining public security continues to be a major challenge. Although crime has declined significantly since Andrew Holness's first term in office, with the homicide rate falling from 58.5 per 100,000 inhabitants in 2017 to 23.7 per 100,000 in 2025, Jamaica remains one of the most violent countries in the world. Authorities therefore regularly impose localised states of emergency to combat gang activity. However, the decline in crime could be jeopardized by the socio-economic consequences of Hurricane Melissa, which has significantly worsened living conditions for some segments of the population.

On the international stage, Kingston continues to pursue a pragmatic foreign policy aimed at strengthening ties with the US, its main trading, tourism and financial partner. The relationship is reflected in close cooperation on combating illegal immigration, arms trafficking and drug smuggling. In June 2026, the two countries signed a Memorandum of Understanding under which Jamaica would serve as a temporary transit location for third-country nationals deported by US authorities, with up to 25 individuals arriving every two weeks. This strategy of closer alignment is intended to secure trade and migration-related concessions from Washington. At the same time, Jamaica maintains generally positive relations with its Latin American neighbours as well as with China.

Last updated:August 2026