Slow growth dependent on mining exports and tourism

In 2023, growth decelerated due to a moderation in private consumption, caused by rising prices. However, it remained underpinned by export revenues from the recovery in tourism (35% of GDP). In addition, mining (of bauxite in particular) and the reopening of JAMALCO, one of the country's largest aluminum refineries (9% of total exports in 2022) supported exports. In 2024, growth is set to slow moderately. It will remain dependent on tourism, mainly from the US. Moderating US activity should damp export growth as the US is also the country's leading trading partner (62% of total exports in 2022 and 42% of total imports). However, continued recovery in mining and manufacturing (notably textiles, chemicals, and electronic components) should help to sustain them. The US slowdown will also impact growth in expatriate remittances (70% of remittance inflows), and hence consumption. Private investment will support growth, thanks to the expansion of hospitality activities and related infrastructure. A Resilience and Sustainability Facility Agreement approved by the IMF in March 2023 will promote green investments and investments focused on resistance to various weather phenomena. These investments, which are expected to pay off quickly, are all the more crucial given the risks associated with drought episodes linked to the El Niño meteorological phenomenon.

Inflation slowed in 2023 in the wake of falling world commodity prices and the effects of restrictive monetary and fiscal policies. However, food inflation remained high, reaching 8.7% in December 2023. Inflation will continue to ease in 2024, converging towards the mid-point of the Bank of Jamaica's target range (5% ±1%). However, upside risks remain due to volatile commodity prices and wage pressures associated with public sector reform.

Current account deficit set to remain high

High fuel, food and freight prices, and lower remittances contributed to a larger current account deficit in 2023, which is expected to further widen slightly in 2024. Fewer remittances and a slowdown in exports will be the main causes. The current account erosion will result in a lower surplus on the transfers account and a higher deficit on the trade balance, which will be partly offset by a higher surplus on the services account thanks to revenues associated with tourism. FDI will remain the main source of financing for the current account deficit. Gross foreign exchange reserves will remain at a comfortable level at around 6 months of imports in June 2023.

Stabilised public surplus and downward debt trajectory

In 2023, the budget account recorded a slight surplus on back of buoyant tax revenues due to improved tax collection. The budget balance will remain at a similar level in 2024. The surplus will result from an increase in revenues and a reduction in interest payments. The latter would result from both a reduction in debt and an improvement in external financing conditions. The government will pursue fiscal consolidation by controlling expenditure. The reform of public remuneration that began in 2022 will continue in 2024-25 to simplify and reduce salary and allowance scales, thereby moderating expenditure. It also includes a 20% pay rise for civil servants over three years. In addition, an agreement with the IMF will provide budgetary leeway, including financing of USD 1.7 billion, of which USD 967 million under the precautionary and liquidity line, and a resilience and sustainability facility of USD 763 million.

The large surplus will continue to accompany the downward trajectory of the public debt ratio. The proportion of debt issued in foreign currencies and held abroad will remain substantial, with foreign debt reaching 61.5% in fiscal year 2022-2023, 98% of which is denominated in USD, exposing the economy to foreign exchange risk.

Persistent challenges and opposition gradually gaining ground

Despite a record abstention rate (63%), the center-right Jamaica Labour Party (JLP), led by Prime Minister Andrew Holness, won 49 of the 63 seats in the September 2020 general election. Despite this solid majority, frustrations over the high cost of living and persistent crime are fuelling discontent. In addition, recent polls have reported a rise in voting intentions for the People's National Party (PNP), the main center-left opposition party chaired by Mark Golding. This puts the PNP in a stronger position for the next elections scheduled in 2025. Extensive measures have been put in place in response to the high crime level, including the state of emergency decree which has been in force across a large part of the island since November 2022, and the introduction of stiffer penalties for firearms possession. In response to the resurgence of gang warfare, regional efforts to combat the problem have also been undertaken by the Caribbean Community (CARICOM) and the Organization of American States (OAS).

Jamaica maintains ties with the US in the fight against arms and drug trafficking. Although the influence of the British monarchy on the country's administration is limited, Andrew Holness aspires to follow the example of Barbados by severing ties with the Crown and becoming a Republic. The organisation of a referendum on the issue before the end of his term of office in 2025 remains on the agenda. In June 2022, the creation of a Constitutional Reform Committee made up of government representatives marked an important turning point in the transition toward a post-Commonwealth era.