JAMAICA-Jamaica recorded a near eight percent contraction in its economy in the last quarter of 2025.

KINGSTON, Jamaica, CMC – The Planning Institute of Jamaica (PIOJ) on Tuesday said that there has been a 7.5 per cent contraction of the local economy during the period October to December last year, relative to the corresponding quarter of 2024.

PIOJ Director General, Dr. Wayne Henry, told a news conference reviewing Jamaica’s economic performance during the last quarter of 2025, that this is the largest quarterly decline since the July–September 2020 quarter, when the COVID-19 pandemic impacted the economy.

“The estimated outturn for the review quarter largely reflected the effects of Hurricane Melissa, a Category 5 hurricane that caused widespread destruction due to hurricane-force winds, storm surge, intense rainfall, flooding, and landslides.

“Combined, these shocks negatively impacted the performance of all industries, particularly Agriculture, Forestry and Fishing; Accommodation & Food Services Activities…Transport and Storage; and Electricity, Water Supply and Waste Management,” Henry said, adding that consequently, both business and consumer confidence levels declined, reflecting pessimism about future business conditions, return on investments, changes in income and profitability.

He said that it should be noted, however, that this estimated outturn of a 7.5 per cent contraction is better than initially projected immediately after the passage of the hurricane, when the economy was forecast to decline within the range of 11 to 13 per cent.

Henry said that this is attributed to better-than-anticipated outturns in some industries, partially reflecting the resilience and industriousness of businesses and individuals in rebuilding following the shock.

According to the PIOJ, real value added for calendar year 2025 was estimated to have remained flat despite the hurricane’s impact in the final quarter of the year.

Henry said that from January to September 2025, the economy grew by 2.6 per cent as it recovered from Hurricane Beryl and entered a new growth phase.

“These gains were counterbalanced by the downturn associated with Hurricane Melissa. For the calendar year, the outturn reflected the combined effect of growth in real value added for the Goods Producing Industry, up 1.5 per cent, and contraction in the Services Industry, down 0.5 per cent.

Within the Goods Producing, three of the four industries recorded higher output levels, led by Agriculture, Forestry & Fishing, up 4.4 per cent, and Construction, up one per cent. For the Services Industry, the contraction reflected declines in six of the nine industries except Information and Communication; Finance & Insurance Activities; and Public Administration and Defence.”

Henry said the short-term prospects for the Jamaican economy are negative, based on the expectation that the economy will not register year-on-year growth until the October to December 2026 quarter.

He said preliminary data for the January–March 2026 quarter indicates that in January 2026, total bauxite production in the Mining and Quarrying industry declined by 33.8 per cent, reflecting reduced output of alumina and crude bauxite.

Within the Accommodation and Food Service Activities industry, preliminary airport arrivals fell by 36 per cent. For the Electricity, Water Supply & Waste Management industry, water consumption for January 2026 declined by 2.7 percent.

“However, there are some potential upsides to this outlook, including faster than anticipated rebound in sectors such as Agriculture and Tourism, as well as a boost in Construction activities as households and state entities intensify work towards reconstruction activities.”

Henry said, given this context, the projection for January to March 2026 is for a contraction in output within the range of four to six per cent. He said for fiscal year 2025/26, the economy is expected to contract within the range of one to two per cent.

Henry said before the hurricane, Jamaica’s economy was projected to record real GDP growth of 2.2 per cent for the fiscal year 2025-26.

He said post-disaster estimates, however, indicate a contraction, with real GDP initially projected to decline by 4.3 per cent for the financial year 2025/26.

“This would translate to a reduction of 6.5 percentage points in the GDP growth rate for the financial year 2025/26. It should be noted, however, that based on the strength of the recovery to date, the current outlook for the financial year 2025/26 has been revised to a point estimate of -1.4 per cent. This would now translate into a reduction of 3.6 percentage points in the GDP growth rate estimate for the current fiscal year.”

Henry said that the hurricane is also expected to trigger significant short-term fiscal slippage. “The overall fiscal deficit is projected to be 3.5% of GDP …compared with the balanced budget originally targeted. The fiscal outturn will be adversely affected by developments on both the revenue and expenditure sides.”

Henry said, in summary, that preliminary data indicate the Jamaican economy contracted, largely reflecting the negative impact of the damage and losses sustained as a result of Hurricane Melissa on productive activities.

“With Jamaica recording a significant year-on-year decline in October–December 2025, and expectations for a further year-on-year contraction in the January–March 2026 quarter, there are concerns regarding the possibility of an economic recession affecting Jamaica in the short term.

“However, at this stage, it is not likely that Jamaica will experience an economic recession within the short term, barring any unforeseen shocks,” he added.

Henry said that a recession is defined as a contraction in the business cycle, indicating a significant slowdown in economic activity.

“Generally, as a rule of thumb, it is considered that two consecutive quarters of a quarter-on-quarter decline in a country’s seasonally adjusted real GDP represent a recession.

“Seasonally adjusted GDP estimates remove recurring patterns such as weather changes or holidays that affect economic activity, making it easier to observe underlying GDP growth trends across consecutive quarters.”