Contractions In Tourism, Remittances Will Widen Jamaica's Current Account Deficit

• According to Fitch, Jamaica’s current account deficit will widen to 5.8% of GDP in 2020, from an estimated 2.5% of GDP in 2019, as the coronavirus pandemic disrupts the country’s main export activities.
• Historically, large remittance inflows have produced sizeable secondary income surpluses, which, in turn, have helped contain Jamaica’s overall current account deficits. However, as the US economy enters a recession in 2020, it will cause a significant spike in unemployment, weighing on household incomes of Jamaican-Americans and reducing the funds they are able to send back to Jamaica.
• However, steady foreign direct investment inflows and sizeable international reserves will reinforce Jamaica’s external account stability. According to Fitch durable FDI inflows—which are less prone to volatility than other investments—is expected to support Jamaica’s external financing needs over the coming quarters.
• While FDI inflows will likely slow in the coming quarters as both sectors contract, Jamaica’s international reserves, which were USD3.2bn in March 2020, equivalent to 4.8 months of imports, will offer moderate support in the event of a short-term imbalance in its external accounts.

(Source: Fitch Solutions)