THE current drought affecting Jamaica could cost the economy more than $35 billion over its duration, with economist Keenan Falconer warning that the disruption to businesses, workers, and agricultural production could further weigh on economic output.

“The drought could directly account for as much as 1 per cent of GDP (gross domestic product) or over $35 billion over its entire duration, with the figure being higher when indirect impacts are considered,” he told the Jamaica Observer.

The economic impact is already being reflected in some sectors, particularly agriculture, which was estimated to have declined by 17 per cent yearon- year in the April to June quarter. While agriculture is expected to remain the most affected sector, Falconer said water shortages would also affect goods-producing industries, including manufacturing and construction. Among service producers, accommodation and food service activities, particularly the restaurant and hospitality sector, are expected to be among the hardest hit. Some retail activities, water supply, waste management and health services would also be affected.

For businesses, particularly micro, small and medium-sized enterprises (MSMEs), water shortages are also increasing the cost of maintaining operations. He noted that many businesses could be forced to curtail operating hours to partially offset those higher costs, which includes planning for greater expenditure on water supplies to the extent that they are available. The disruption could also affect employees, who may be unable to prepare for work as usual and could have to stay home unexpectedly. The physical effects of heat stress during the drought could further affect productivity. Falconer estimates that in a typical work week, productivity losses could collectively amount to over 50 million hours at a maximum if every member of the labour force is affected by water shortages in some way, causing them to lose some or all of their working hours as a result of water shortages or restrictions.

“At an average hourly productivity rate of almost US$9 for Jamaica, the impact could be well over US$500 million or $8 billion in lost economic output,” he told BusinessWeek.

According to Falconer, the economic cost of the drought is not currently being measured exclusively, but some of the economic decline in 2026 is partially attributable to drought conditions, particularly in agriculture. He also pointed to the cost of government spending on drought mitigation, arguing that such expenditure represents an opportunity cost because the resources could have been deployed elsewhere in the absence of the drought. And, according to the Meteorological Service, led by Principal Director Evan Thompson, the rainfall outlook provides little immediate relief for businesses already grappling with water shortages. The agency projects rainfall for October to December to remain below normal for most parishes, with the current El Niño event suppressing rainfall activity, particularly in eastern and central Jamaica. It noted, however, that the situation is not islandwide but is affecting parishes with larger populations and, consequently, greater demand for water. Significant rainfall is also not occurring in most of the catchment areas supplying those populations.

“We are more than halfway through the primary rainfall season, and with El Niño still impacting rainfall activity, it is unlikely that sufficient rainfall will be received before the start of the dry season,” the Met Service said.

The primary rainfall season runs from August to November, while the dry season typically spans December through March. While the Met Service is somewhat optimistic about a possibility of a slightly wetter dry season based on studies by colleagues, rainfall is not expected to be sufficient to address the deficit accumulated during the primary rainfall season.

“With the current projections for El Niño conditions expected to extend well into 2027, this is a real economic risk that Jamaica will need to start contemplating seriously and begin mitigating as best as possible in order to prevent a reversal of economic output,” Falconer added.

Against that backdrop, the Government has been working to stabilise supplies in affected areas. It recently entered into an agreement with the Concara Group in Portmore, St Catherine, to supply four million gallons of water to the National Water Commission network.

“Now we don’t disaggregate and say this is for houses, this is for school, this is for business. But that would have provided significant stability to the Portmore side of the network and has eased the demand on the Tulloch Springs, which supplies southern St Andrew and Portmore normally,” Minister of Water, Environment and Climate Change Matthew Samuda told BusinessWeek.

The additional supply is being used to strengthen the overall network rather than being allocated specifically to businesses or households, with the increased availability easing demand on the Tulloch Springs system. Longer-term, the Government is also investing in additional water-treatment capacity. Construction of the Rio Cobre water treatment plant began about a year and a half ago, and the facility is expected to supply 15.5 million gallons of water between Spanish Town and southern St Andrew into Kingston. The project is expected to begin putting water into the network by May 10 next year.

But while the Government is pursuing measures to strengthen water supply, Falconer recommends increased water storage solutions, particularly for small businesses, based on needs and priority assessments, as well as targeted fiscal interventions, including subsidies, to provide short-term relief. Longer term, he said efforts should focus on accelerating water resilience through long-term project planning, bankable initiatives and public-private partnerships. In the meantime, with rainfall not expected to be sufficient to address the current deficit, the Met Service is encouraging businesses and other water users to make greater use of available rainfall while conserving existing supplies.

“We continue to encourage rainfall harvesting where possible and conservation and careful use of this very valuable resource,” the Met Service said.