JAMAICA could return to pre-Hurricane Melissa levels of economic output as early as the April-to-June quarter of 2027, significantly sooner than previously expected as the year-on-year contraction in the economy narrows and reconstruction gathers momentum.

The Planning Institute of Jamaica (PIOJ) said Tuesday that the current trajectory suggests the economy could regain the level of output recorded before Melissa within 1.5 to two years of the hurricane, compared with an earlier expectation that recovery would take about three years and extend into fiscal year 2028/29.

“Note, however, that full recovery — to include rebuilding efforts and replacing housing stock, public infrastructure and livelihoods — will be over a more extended period, possibly three to five years,” PIOJ Director General Dr Wayne Henry said at the institute’s quarterly economic briefing.

The improved outlook comes even as preliminary PIOJ estimates show that real gross domestic product (GDP) contracted 2.9 per cent in the April-to-June quarter compared with the corresponding period of 2025, marking a third-consecutive quarter of year-on-year decline.

PIOJ officials photographed at a quarterly press briefing on Tuesday at the entity’s headquarters in St
Andrew. From left are James Stewart, senior director of the Economic Planning and Research Division; Director General Dr Wayne Henry; and Carlos AppleWhaite, development analyst.

The economy contracted 7.1 per cent year on year in the October-to-December 2025 quarter and 4.1 per cent year on year in January-March 2026.

The PIOJ, however, rejected suggestions that Jamaica is in a recession, pointing instead to the sequential improvement in economic activity following the hurricane-induced collapse in the final quarter of 2025.

“Yes, we can confirm that there is not a recession. We are not in a recession,” Senior director of the PIOJ’s Economic Planning and Research Division James Stewart told the Jamaica Observer.

Stewart said a recession also appeared unlikely for the remainder of the year.

While output in the first quarter of 2026 remained below the corresponding period a year earlier, seasonally adjusted real value added an increased 3.3 per cent compared with the hurricane-hit October-to-December quarter.

“Following three consecutive quarters of quarter-over-quarter growth during the first nine months of 2025 the economy experienced a sharp setback in the October-December 2025 quarter as Hurricane Melissa triggered a 7.3 per cent decline in real value added relative to July-September 2025,” Henry said.

“Importantly, the latest GDP release from Statin [Statistical Institute of Jamaica] confirms that the economy has begun to recover from the shock. The seasonally adjusted real value added for January-March 2026 increased by 3.3 per cent compared with the October-December 2025 quarter, signalling a rebound in economic activity,” he added.

The PIOJ, in its latest review of economic performance, said the April-to-June downturn largely reflected the lingering effects of Hurricane Melissa, which disrupted production, employment, domestic demand, and business and consumer confidence.

During the review quarter the goods-producing industry declined by an estimated 6.4 per cent as key sub-industries, including agriculture and mining and quarrying, recorded significant contractions.

Agriculture fell 17 per cent as hurricane damage across major crop-producing parishes was compounded by drought conditions associated with the El Niño phenomenon.

Mining and quarrying, on the other hand, contracted by 23.9 per cent, largely due to a 30.8 per cent decline in aluminium production as technical challenges linked to hurricane damage continued to weigh on operations.

There were, however, signs of resilience in other productive activities as manufacturing grew by an estimated one per cent while construction expanded 0.3 per cent, supported by higher civil engineering activity.

The services industry contracted by 1.7 per cent, with most industries declining. The exceptions were financial and insurance activities, up 1.9 per cent; wholesale and retail trade, repair of motor vehicles, and installation of machinery and equipment (WRTRIM), up 0.2 per cent; and public administration and defence, up 0.1 per cent.

Accommodation and food service activities, one of the larger service industries, however fell 12.2 per cent, reflecting weaker tourism activity. Preliminary data show stopover arrivals for April and May falling 19.6 per cent to 382,745 visitors, while visitor expenditure declined 17 per cent to US$578 million.

For the January to June period or first half of the calendar year real GDP is estimated to have contracted by 3.5 per cent, with the goods-producing industry down 6.8 per cent and services down 2.4 per cent.

Despite the weaker headline numbers, PIOJ Director General Dr Wayne Henry said the underlying trend points to an economy recovering from a significant one-off shock rather than entering a prolonged downturn.

Henry also pointed to developments in the labour market as another positive indicator, saying the pace of recovery reflects the resilience of Jamaica’s underlying economic fundamentals despite widespread disruption caused by the hurricane.

The PIOJ, while maintaining a negative short-term outlook, said it expects the rate of contraction to narrow as more industries recover. The institute forecasts a contraction of 0.5 per cent to 1.5 per cent in the current July-to-September quarter, followed by growth of one per cent to three per cent for fiscal year 2026/27.

“Economic growth is expected to be driven by gradual recovery in all industries, due to an expectation for fairly robust growth in the latter half of the fiscal year,” Henry said.

He said the outlook is supported by the low-base effect from Hurricane Melissa’s impact in the latter half of fiscal year 2025/26, faster recovery across most industries, increased reconstruction activity, favourable weather conditions, and the potential resolution of the ongoing conflict in the Middle East.

A rise in capital expenditure under the Public Sector Investment Programme is also expected to support the recovery. Spending increased 55.8 per cent to $13.7 billion during the April-to-June quarter, boosting public investment and reconstruction activity.

“This momentum is expected to continue over the short to medium term as reconstruction activities intensify and the implementation of recovery projects accelerate,” Henry said.

PIOJ infographic showing GDP performance and economic output