Jamaica Navigates Economic Recovery After Hurricane Melissa

The Jamaican economy faces significant headwinds following the devastating impact of Hurricane Melissa, which inflicted widespread destruction across critical infrastructure and key sectors.

Recent estimates indicate that the hurricane caused approximately US$8.8 billion in damage—over 40% of Jamaica’s GDP—substantially higher than initial assessments. The agriculture sector has been hit particularly hard, suffering losses of nearly US$389 million, and the tourism industry, mainly in the western parishes, has seen 43% of its hotel room stock immediately closed, with additional disruptions from worker layoffs and postponed reopenings. These setbacks are expected to have a profound effect on prices, incomes, and overall economic activity in the near term.

In response to these shocks, the Bank of Jamaica's Monetary Policy Committee has decided to maintain its policy rate at 5.75% per annum and proactively support stability in the foreign exchange market. This decision takes into account mounting upside risks to inflation projections, given the potential for prolonged and more intense price increases triggered by supply disruptions and increased government spending for recovery efforts. The central bank has already intervened in the foreign exchange market, selling US$250 million since the hurricane and taking further steps to reassure markets and meet extraordinary import demands associated with rebuilding.

Headline inflation in November 2025 climbed to 4.4%, with forecasts pointing to a further rise above the Bank’s 4.0–6.0% target range through 2026, particularly as core inflation begins to reflect wider price increases beyond food and fuel. Meanwhile, the economy is expected to contract sharply by 11%–13% in the December 2025 quarter and by up to 6% for the financial year, before a gradual return to growth as reconstruction gains pace. The current account, previously in surplus, is projected to move into deficit due to higher imports and reduced tourism revenue, but this will be cushioned by Jamaica’s strong international reserves, enhanced by disaster risk financing and multilateral support.

This challenging economic period underscores the central bank’s commitment to managing inflation and maintaining macroeconomic stability, recognizing that a disciplined policy approach is vital to safeguarding livelihoods and ensuring a successful recovery for all Jamaicans.