Jamaicans are spending less, and adverse weather threatens, but the BOJ projects economic recovery over two years

Caribbean Money Daily

Weaker domestic demand and the recurrence of adverse weather are twin threats, but for fiscal year 2025/26 and FY2026/27, real GDP is projected to expand in the ranges 1.0 to 3.0 per cent and 1.0 to 2.0 per cent, respectively the Bank of Jamaica outlines in its newest quarterly monetary policy report (QMPR).

The central bank asserts that the projected growth for FY2025/26 largely reflects a recovery in economic activities following the impact of Hurricane Beryl, evidenced in part by increases in Agriculture, Forestry & Fishing and Mining & Quarrying.

Over the medium-term (FY2027/28 – FY2029/30), GDP is projected to grow by 1.0 to 2.0 per cent.

In background, the Jamaican economy is estimated to have declined at a year-over-year rate of 2.8 per cent for the September 2024 quarter, in contrast to the growth of 0.2 per cent recorded for the June 2024 quarter.

The BOJ says that Real GDP is projected to in the range of -1.0 to 0.5 per cent for FY2024/25, largely reflecting the adverse impact of Hurricane Beryl on the economy. This estimated decline is largely underpinned by contractions in Agriculture, Forestry & Fishing, Construction, Hotels & Restaurants and Electricity & Water Supply.

Risks to the forecast for domestic real GDP growth over the near-term are skewed to the downside, reflecting potentially lower external demand and adverse weather conditions. Over the medium-term, the risks to the forecast for domestic real GDP growth are also skewed to the downside, reflecting primarily weaker than projected external demand.

Upside risk to domestic output emanates from greater than anticipated investment spending on climate related projects. GDP Growth The Jamaican economy is estimated to have declined at a year-over-year rate of 2.8 per cent for the September 2024 quarter, in contrast to the growth of 0.2 per cent recorded for the June 2024 quarter. This contraction largely reflects declines in Agriculture, Forestry & Fishing and Mining & Quarrying.

The BOJ states that The decline in real GDP is attributed to the impact of Hurricane Beryl on the above-noted sectors but also reflected the lagged effects of shocks to the price level on spending over the past three years as well as the impact of monetary tightening.

For Agriculture, Forestry & Fishing, the contraction was underpinned by a decline in domestic crop production. For Mining & Quarrying, the projected decline for the September 2024 quarter largely reflected lower capacity utilization at all mining plants, relative to the same period of 2023).

The central bank also states that there was also an estimated contraction in Construction which was reflected in declines in the sales of construction materials and lower government capital spending. The weakening within the industry reflected in part the impact of tight monetary conditions.

As it relates to Electricity & Water Supply, a contraction is attributable to lower electricity and water consumption partly due to the adverse impact of Hurricane Beryl which damaged electricity and water supply infrastructure. – Information Source: Bank of Jamaica Quarterly Monetary Policy Report, published November 2024. 

-Caribbean Money Daily