Jamaica

Return to growth, largely dependent on the US economy

The Jamaican economy went into recession in 2024 when Hurricane Beryl (July) and Storm Rafael (November) prompted a decline in private consumption and a deterioration in net exports. In the third quarter, the mining industry was particularly affected on back of a decline in exports of alumina (-20% year-on-year) and bauxite (-28%).

Activity will rebound in 2025, driven by a recovery in private consumption, stimulated by the dynamism of tourism (22% of GDP in 2024), pre-election spending and disinflation. After reaching a peak of 6.5% in August 2024 after a hurricane-induced price surge, inflation eased to 5% at the end of 2024, the midpoint of the Bank of Jamaica’s (BoJ) target range (4.0% - 6.0%). The BoJ gradually reduced its key rate from August 2024 (7% to 6.75%), down to 6% in March 2025. Consumption will also benefit from the strength of the labour market, with unemployment at a historic low (3.5% in October 2024 compared to 5.4% in Q1). However, the US slowdown could weigh on tourism (50% of arrivals in 2024) and remittances (17.4% of GDP; 65% from the US in 2024). The Trump administration's stricter migration policy and its threat to Jamaicans residing in the US (1 million people, including 5,100 under threat of deportation), could also curb these remittances. In addition, public consumption will be crimped by fiscal consolidation measures. Foreign and domestic private investment will remain robust, driven by ongoing tourism projects and measures announced by the government in November 2024. These include a tax credit for investments in low-income areas and the creation of a fund dedicated to public-private partnership (PPP) infrastructure projects.

Exports of agricultural products will rebound in 2025, while the mining industry (43% of total exports in 2023) will benefit from the resumption of operations at the JAMALCO aluminium and WINDALCO bauxite plants. However, Jamaica will face the Trump administration's new trade barriers. Even if the 25% tariff imposed on aluminum in March 2025 does not apply to bauxite and aluminium, the 10% tariff applied since the beginning of April to the rest of the island's imports constitutes a risk given its dependence on the US (its primary customer, accounting for 47% of exports in 2023). The main products exported to the US are aluminum (96% of production is destined for the US) as well as sugar (79% is exported to the US), coffee and bananas.

Budget austerity to continue

The public surplus improved in the 2024-25 financial year thanks to expenditure control and higher non-tax revenues resulting from the NMIA airport asset securitisation transaction. The government has committed to balancing the budget for the 2025-2026 financial year, which will be reduced by USD 810 million compared to 2023-2024. Firstly, expenditure will fall to 30.5% of GDP in 2025-2026, compared with 30.7% in 2024-2025, a decrease mainly attributable to the reduction in debt servicing costs (29% of total expenditure in 2024-2025 compared with 35% in 2025-2026). Priority will be given to the public sector reform (39.5% of expenditure) initiated in 2022, which concerns the transformation of the remuneration system and the simplification of salary scales. Capital expenditure (5% of expenditure) will finance infrastructure projects already in progress (southern coastal highway project, Montego Bay ring road, etc.). At the same time, revenue will fall (30.6% of GDP in 2025-2026) due to a decline in non-tax revenue after its high level in 2024-2025. The budget includes measures to support households and businesses. For example, the income tax threshold will gradually increase over three years. A reduction in the rate of tax on electricity consumption will be introduced for resident customers. Other measures are planned, such as a reduction in tax on ordinary dividends for non-resident companies and individuals.

Whatever the outcome of the elections, by maintaining a large primary surplus (6% of GDP in 2024/25), the government will remain committed to the objective of bringing the public debt ratio below 60% of GDP by 2027-2028. The share of the budget devoted to interest payments has thus been reduced (14% of total expenditure in 2025-2026 compared with 19% in 2021-2022). External debt represents 63% of the total (February 2024), 95% of which is denominated in USD. Private creditors, mainly bondholders, hold 55%, while multilateral creditors hold 37%.

The current account surplus narrowed in 2024. Climate events led to a reduction in tourist arrivals and an increase in the trade deficit (23.5% of GDP in 2024). In addition to imports related to reconstruction, there was a decline in mining and agricultural exports. Expatriate remittances fell slightly (-0.4% compared to 2023), marking their third consecutive year of decline, but remained above the pre-pandemic level. Despite the expected drop in the energy bill and the robustness of tourism – even if the latter is likely to be impacted by the US slowdown – the current account surplus will narrow again in 2025. The weakening of US demand will damp exports, while expatriate remittances are likely to suffer, not only from a softer US economic situation, but also from a tougher migration policy. Foreign exchange reserves will remain at a comfortable level, covering 5.5 months of imports. They increased by nearly USD 825 million in 2024 to reach USD 5.6 billion at the end of the year.

Rise of the opposition and persistent criminality as elections approach

Despite a record abstention rate (63%), the center-right Labor Party (JLP), which has been in power since 2016 and is led by Prime Minister Andrew Holness, won 49 of the 63 seats in the September 2020 general election. With the next general election scheduled for September 2025, the prospects of a JLP re-election appear uncertain. The People's National Party (PNP), the main center-left opposition party led by Mark Golding appears to be gaining ground. According to a January 2025 poll by local institute Don Anderson, the PNP garnered 35.4% intended votes, compared to 30.7% for the JLP. Moreover, in the February 2024 municipal elections, the JLP regained control of the coveted Kingston and St. Andrew Municipal Corporation. Several factors can be attributed to the eroding government support, notably among which is inflation, which continues to fuel discontent. Above all, insecurity remains a major concern. Although the total number of homicides fell from 1,399 in 2023 to 1,139 in 2024, Jamaica still has one of the highest homicide rates in the world (40 per 100,000 inhabitants). The authorities have deployed drastic measures, including the declaration of a state of emergency (November 2022) over a large part of the island and the adoption of harsher penalties for the possession of firearms. These policies were reinforced following gang shootings in August 2024, leading to the imposition of a night-time curfew for 14 days. In order to respond to the upsurge in gang warfare, regional efforts to combat it (Caribbean Community, CARICOM and the Organization of American States) have also been made.

In terms of foreign policy, Jamaica maintain its strong ties with the US, its main trading partner. This cooperation is reflected in close collaboration in the fight against arms and drug trafficking. However, the Trump administration's protectionist measures and strict migration policy could affect bilateral relations. In addition, Jamaica continue to develop its economic relations with China after joining the New Silk Roads initiative in 2019, which has enabled the country to benefit from Chinese investments, particularly in infrastructure.

Last updated:April 2025