BMI Anticipates Hurricane Melissa Will Cause a Recession in Jamaica

On October 28, 2025, Hurricane Melissa made landfall in Jamaica as a Category 5 hurricane – the strongest recorded storm in the island’s history – just over a year after Hurricane Beryl. Jamaica’s storm history provides guideposts for the extent of the potential negative economic impact stemming from Hurricane Melissa. Data from Jamaica show the severe impact of storms, even when they do not make landfall.
For example, Hurricane Beryl, which narrowly avoided landfall in July 2024, resulted in a significant GDP contraction in both Q2 and Q3 2024, with GDP falling 2.7% peak to trough. This contraction was driven by declines in agriculture (-9.1% q-o-q), mining (-10.7%), and utilities (-5.2%), and all but two sectors contracted in Q3 2024. Despite strong growth to start the year, the economy contracted by 0.7% in 2024, largely due to Beryl’s damage. Furthermore, other storms since 2000 that caused at least US$100Mn in direct damages saw, on average, a peak-to-trough contraction of 2.3%.
Given its unprecedented strength, the impact from Hurricane Melissa is likely to be even more severe. BMI research expects the storm to contract overall domestic output by 3.0%–6.0% peak to trough. This contraction follows a spirited economic recovery after 2024’s devastating storm season.
Considering the path of the storm through the western portion of the island – including the parish of St. Elizabeth, Jamaica’s agricultural heartland – BMI sees scope for sizable contractions in agricultural output, as seen following previous storms. Additionally, given the noticeable contraction in Jamaica’s tourism industry following Hurricane Beryl, with stopover arrivals falling 6.8% y-o-y in Q3 2024, expectations are for a more severe impact following Hurricane Melissa, which made landfall and passed close to Montego Bay, a key resort area home to a large cruise terminal and international airport that accounted for 80.9% of stopover arrivals in 2024.
This impact will be compounded by higher inflation and increased imports. Indeed, headline inflation rose 1.4pp in August 2024 following Hurricane Beryl – driven by food price increases – and BMI expects a similar, temporary jump in domestic prices following Hurricane Melissa. Additionally, falling inbound tourism will reduce services exports and narrow the country’s trade and current account balances. Furthermore, expectations are for Jamaica’s goods trade deficit to widen due to a temporary increase in food imports amid widespread crop destruction, further weighing on growth. That said, Jamaica’s external position will be buttressed by increased remittance inflows, potentially offsetting some lost inflows from declining services exports.
Nonetheless, overall threats to macro stability are lessened by Jamaica’s successful pro-growth reforms. Jamaica’s monetary authorities have successfully stabilised domestic inflation expectations by implementing a credible inflation-targeting monetary policy regime, a tailwind for price stability. Additionally, the government has made significant progress to stabilise its finances in the past decade, substantially reducing the size of its fiscal deficit. This has helped to limit its reliance on external financing, while increasing its reserves, supporting Jamaica’s macro stability in the face of severe external shocks, and ensuring it can pay for necessary imports.
Moreover, while Jamaica’s recovery will likely be prolonged, the country has developed fiscal buffers to defend against natural disasters and support rebuilding. This includes Jamaica’s US$150Mn catastrophe bond and the island’s disaster funding coverage at over US$800Mn as of June 2025, as assessed by the Minister of Finance. Crucially, these resources have already been budgeted and funded – a tailwind for continued fiscal stability. However, should recovery require substantially more funds than currently allocated, Jamaica’s sustainable fiscal position gives it scope to increase relief spending without risk of destabilising the country’s finances.

(Source: BMI, A Fitch Solutions Company)