Jamaica's Economy Continues Hurricane Recovery Amid Challenging External Environment

Despite a 2.9% year-on-year contraction in Q2 2026, seasonally adjusted quarter-over-quarter (q-o-q) GDP data suggest that Jamaica's economy continues to rebound from Hurricane Melissa. According to BMI analysts, the economy grew 1.2% q-o-q, on a seasonally adjusted^[1] basis, matching expectations. Therefore, while strong base effects from 2025 and a downward structural shift from Hurricane Melissa will see year-on-year (y-o-y) contractions through Q3 2026, the country’s seasonally adjusted GDP data reveal an economy making progress in its recovery.
This recovery has been supported by domestic commerce, which recovered ground lost from the hurricane by Q2 2026, with the level returning to its pre-storm mark. Additionally, manufacturing, hospitality, and agriculture have seen consecutive improvements over the previous quarter through H1 2026. While Jamaica's total employment has yet to rebound to pre-hurricane levels, the labour market added jobs in Q2 2026 (+29.4k) for the first time since landfall and the unemployment rate remained low (3.7%). This has supported domestic consumption, a key pillar of the economy. Alongside these labour market gains, remittance flows in 2026 through July have strengthened relative to 2025, supporting incomes, while private credit growth nudged up in Q2 – all positives for domestic demand.
Looking ahead, recovery momentum is expected to continue to moderate in H2 2026 and into 2027 as external headwinds continue to blow, with growth forecast at -1.0% in 2026 and 2.3% in 2027. Signs of this moderation are already evident, although the domestic trade sector has proven resilient. Sequential growth, or q-o-q growth, slowed markedly in Q2 (from +1.0% in Q1 to +0.4%), consistent with rising inflation eroding real wages, against still-depressed employment, and tempering household spending into mid-2026.
Most sectors also saw slowing growth in Q2 versus the prior quarter. On a y-o-y basis, mining (-26.1%) and agriculture (-15.2%) continued to underperform, alongside weakness in hospitality (-12.3%), utilities (-4.2%), and transportation (-6.1%). This revealed a broad-based cooling as mining fell, tourism arrivals remained capacity-constrained, and agricultural output stayed below pre-hurricane levels amid productivity challenges, likely due to the areas hardest hit by Hurricane Melissa, with El Niño-related dry conditions adding further pressure.
Meanwhile, although remittances remain above 2025 levels year-to-date, the post-hurricane surge has faded and growth is now slowing. With global prices rising, the US growth outlook moderating, and US immigration enforcement continuing at pace alongside changes in remittance policy, we see scope for these flows to ease further, a headwind to consumption.
Adding to these external pressures, BMI's Global team now expects the US-Iran conflict to extend into next year, with a preliminary deal anticipated in Q1 2027 and Brent crude forecast to average US$107/barrel in Q4 2026 and US$112/barrel in Q1 2027. As a net energy importer, Jamaica is particularly exposed to elevated oil prices, which will prolong inflationary pressures. Furthermore, the Bank of Jamaica raised its policy rate by 50bps in September 2026, with additional hikes expected through year-end, which will weigh on consumption and investment, while a strong El Niño continues to affect agriculture and mining.
Despite these headwinds, growth is slated to pick up in 2027, as ongoing recovery efforts and increased government fiscal stimulus coincide with the restoration of hotel capacity, the easing of Melissa-related challenges in mining and agriculture and rising electricity consumption as grid capacity is restored. Nevertheless, risks remain tilted to the downside, with longer-than-expected tensions in the Middle East likely to weigh on domestic demand and global demand for Jamaican tourism and exports, while storm activity in the Caribbean remains an ongoing threat.

(Source: BMI, a Fitch Solutions Company)

^[1] Seasonal adjustment is applied to time series data to decompose the underlying trends, business cycle and short-run movements in the series. It is used to identify and adjust for the different components of the time series. Once the components of the series have been identified, the seasonal adjustment removes the impact of the seasonal and calendar components, thus better displaying the underlying trend.