Jamaican 2021 Current Account Surplus to Narrow in 2022 As Imported Goods Growth Overtakes Remittances, Service Exports

  • Jamaica’s current account surplus is forecasted to grow to 0.8% of GDP in 2021 and fall to 0.6% of GDP in 2022, from a 0.1% deficit in 2020. In Q121, remittance inflows brought in USD742.0Mn which was enough to offset most of the goods trade deficit of USD770.1Mn. 
  • This trend is expected to continue throughout 2021, resulting in Jamaica’s first current account surplus since 1994. However, moving into 2022, sustained import demand will begin outweighing the impact of service exports and remittances, narrowing the current account surplus. 
  • The goods trade deficit is expected to continue to widen in 2022 as rebounding economic activity leads to import growth of 8.5%. Overall, the goods trade deficit should widen to USD3.6Bn in 2022, up from USD3.2Bn in 2020 and USD2.9Bn in 2021, and will be the largest contributor to the narrowing of the current account surplus in the coming quarters. 
  • The rebound of Jamaica's tourism industry is expected to widen the service trade surplus to USD674.9Mn in 2022. Tourist arrivals have increased steadily but are still well below pre-pandemic levels, reaching 166,046 tourist arrivals in June 2021, 54.4% of arrivals in June 2019. With airlines and cruise ship companies announcing the resumption of direct travel to Jamaica starting at the end of 2021, service exports will return close to pre-pandemic levels in 2022. Service export growth is expected to outpace service import growth, reaching 13.0% in 2021 and 14.5% in 2022. 
  • The secondary income surplus is projected to continue to widen in 2022 as robust labour markets in the US, UK and Canada boost remittance inflows. Historically, the US accounts for 60.0% of total remittances, while the UK and Canada both accounted for approximately 9.0%. Amid strong recoveries in these markets, remittances have reached historic highs, hitting USD327.5Mn and USD323.6Mn in March and July of 2021, respectively and growth in these markets is forecasted to continue in the quarters ahead. The secondary income surplus is expected to grow by 12.5% in 2021 and 4.5% in 2022, which will partially offset the impact of the wider goods trade deficit on the overall current account balance.

(Source: Fitch Solutions)