Jamaica could face increased hurdles as IMF revises US, global growth forecasts

The International Monetary Fund’s (IMF) revised growth projection for the United States (US) and a downward forecast for the global economy in 2025 has reinforced predictions that small developing states, including Jamaica, could face increased pressure this year, owing to the trade war between the two largest economies – China and the US.

The imposition of US tariffs on China and a similar response from Beijing to Washington are expected to fuel rising trade tensions that would further slow economic growth.

In its latest forecast, the IMF adjusted its growth projection for the global economy from 3.3 per cent to 2.8 per cent this year.

The Fund indicates that the US economic growth will come in at just 1.8 per cent this year, down sharply from its previous forecast of 2.7 per cent.

Economist Keenan Falconer says Jamaica’s particular case is especially pertinent because most of the country’s external sector is tied to the US.

He argued that the downward adjustment in the US economy is likely to have implications for tourism receipts and remittances, as the US is Jamaica’s largest source market.

Falconer noted that general inflationary pressures filter into the entire supply chain which inevitably affects small developing countries like Jamaica.

“There is no real way that we can escape the potential impact of this new trade regime, and it’s no real surprise that the growth projections have had to be revised downwards as a result,” he said.

The Fiscal Policy Paper indicates that Jamaica’s growth forecasts are expected to moderate around 1.0 per cent across the medium term of financial year 2025-2026 to financial year 2028-2029.

Falconer suggested that Jamaica’s growth projections might have to be revisited because that forecast would have been made in light of the recovery from Hurricane Beryl.

“We would be expected to have recovered in the quarter that just ended in March. Now because of the general uncertainty with this trade regime all over the world that would not have been initially priced in the initial projections,” he added.

He, however, contended that Jamaica needs to maintain the path of fiscal stability and resilience, noting that “in these uncertain times we will see the benefit of having built up sufficient buffers over very many years of our fiscal consolidation and programme. Continuing along that path is the only option that Jamaica has in these circumstances”.

"We are entering a new era as the global economic system that has operated for the last 80 years is being reset," IMF chief economist Pierre-Olivier Gourinchas told reporters yesterday.

According to the IMF, the swift escalation of trade tensions and extremely high levels of uncertainty about future policies would have a significant impact on global economic activity.

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