Shocks To Tourism, Remittance Inflows Will Widen Jamaica's Current Account Deficit

• According to Fitch, Jamaica’s current account deficit will increase to 6.7% of GDP in 2020, from 2.1% in 2019, before narrowing modestly to 5.0% of GDP in 2021. Tourism accounts for the majority of Jamaica’s services trade surplus, which was equivalent to 10.7% of GDP in 2019.
• While Jamaica reopened to foreign travel on June 15, Fitch expects that activity in the sector will remain weak through H220. The continued global spread of Covid-19 and stringent protocols on foreign travel in Jamaica, including randomized testing upon arrival, will limit tourism demand.
• Falling remittances and goods exports will also contribute to the widening of Jamaica’s current account deficit. In April 2020, remittances contracted by 9.8% y-o-y, and this trend is expected to continue as unemployment in the US remains high and the continued spread of Covid-19 forces additional lockdowns.
• The coronavirus has also disrupted mining operations and undermined demand for Jamaica’s main goods export, bauxite. Bauxite, which is mined for its aluminum content, accounted for 62.7% of Jamaica’s total goods exports in 2019. However, the temporary closure of Jiuquan Iron and Steel Company's Alpart plant pushed down bauxite exports by 21.0% y-o-y in March 2020, which Fitch expects to continue as global economic activity remains weak. The forecast is that Jamaica’s goods trade deficit will swell to 26.6% of GDP in 2020.

(Source: Fitch Solutions)