The Hurricane That Missed: Jamaica Escapes Irma’s Fury While the Caribbean Burns, and Tourism Keeps Breaking Records

In early September 2017, Jamaica watched Hurricane Irma — one of the most powerful Atlantic storms ever recorded — pass north of the island, devastating Barbuda, Saint Martin, and the British and US Virgin Islands while leaving Jamaica’s resorts and infrastructure largely intact. The near-miss was a reminder of the existential vulnerability that underlies every tourism-dependent Caribbean economy. It was also, for Jamaica, an accidental competitive advantage: as rival destinations counted their losses, the island’s rooms remained open for the winter season that lay ahead.

• Hurricane Irma, a Category 5 storm, passed north of Jamaica in early September, sparing the island while devastating other Caribbean destinations
• Stop-over arrivals for Q3 2017 set another summer record, extending Jamaica’s unbroken run of quarterly and annual tourism bests
• Jamaica’s north coast hotels reported early winter-season bookings above prior year levels as travellers redirected from storm-affected islands
• GDP growth for the first three quarters of 2017 remained modest at approximately 0.6–0.8%, with services growing and agriculture recovering
• The precautionary SBA remained on track, with fiscal performance endorsed in the IMF’s mid-year review
• The BOJ moved to an inflation-targeting monetary framework, beginning the transition away from reserve money targeting

The forecasters at the National Hurricane Centre in Miami had, in the days before Irma made its historic run through the northern Caribbean, placed Jamaica within the cone of uncertainty. Residents stocked up on water and tinned goods. Hotels along the north coast prepared their emergency protocols. And then the storm — Category 5, with sustained winds exceeding 295 kilometres per hour — tracked north of the island, making its landfall on Barbuda on September 6, 2017, and then crossing Cuba before striking the Florida Keys. Jamaica received bands of heavy rain and gusty winds. It did not receive the kind of catastrophic damage that the British Virgin Islands, the United States Virgin Islands, and Saint Martin endured in the same week.

For Jamaica’s tourism industry, the storm’s track had a silver lining. Barbuda, devastated by Irma, was essentially evacuated for months. Saint Martin suffered severe damage to hotel infrastructure that would take years to repair. The Turks and Caicos and the British Virgin Islands, both significant competitors in the premium Caribbean market, faced lengthy reconstruction periods. Jamaica’s north coast product — undamaged, fully operational, and able to receive bookings for the winter season that begins in December — was well positioned to absorb some of the demand displaced from the affected destinations. The Jamaica Tourist Board reported an early uptick in winter-season inquiries and bookings, as travel agents redirected clients from islands whose hotels were temporarily or permanently closed.

Even before the Irma effect, the third quarter of 2017 had delivered another record summer for Jamaica’s tourism sector. Stop-over arrivals exceeded the equivalent period of 2016, extending an unbroken run of quarterly records that had begun in 2012. Occupancy rates across the all-inclusive clusters of St. James, Trelawny, and St. Ann reached the upper range of sustainable high-season performance. The industry’s association bodies reported growing labour shortages in frontline hospitality roles, a welcome problem that reflected the sector’s success and was beginning to push wages upward for entry-level workers. The Statistical Institute of Jamaica confirmed that employment in accommodation and food services had reached its highest share of total employment in the available data series.

The broader economy continued at its moderate pace. The Planning Institute of Jamaica reported GDP growth for the first three quarters of 2017 in the range of 0.6 to 0.8 per cent on an annualised basis, driven by services and partially offset by a continued contraction in mining and quarrying. The agriculture sector, which had been disrupted by Hurricane Matthew in October 2016, was recovering, with banana and breadfruit production returning to trend. Manufacturing remained subdued, as high energy costs — still above the regional average despite the LNG transition — continued to limit Jamaica’s competitiveness in traded goods.

The Bank of Jamaica made a significant institutional announcement in the third quarter: it was beginning the formal transition from a reserve money targeting monetary framework to an inflation-targeting regime. Under the new approach, the Bank would set an explicit inflation target band and adjust its policy rate to keep inflation within that range, rather than targeting the supply of base money as a proxy for price stability. The transition — which would be completed over subsequent quarters — aligned Jamaica’s monetary framework with the international best-practice standard adopted by most advanced and emerging market central banks. It also provided the Bank with greater flexibility to communicate its monetary intentions clearly to financial markets, reducing the uncertainty that had periodically affected the exchange rate during the adjustment years of 2013 and 2014.

The IMF‘s mid-year review of the precautionary Stand-By Arrangement confirmed that Jamaica’s fiscal performance remained in compliance with programme targets. The primary surplus was on track, the debt ratio continued declining, and the structural reform agenda — including improvements to the tax administration system, the civil service efficiency programme, and the financial sector oversight framework — was progressing. The Fund noted that the post-EFF transition had proceeded more smoothly than some had feared, and that Jamaica’s institutional framework appeared robust enough to maintain discipline without the binding quarterly review that the EFF had provided.

What This Means

Hurricane Irma’s near-miss is a reminder of a dimension of Jamaica’s economic vulnerability that GDP figures and fiscal ratios cannot fully capture. The island’s single largest growth engine — tourism — is geographically exposed to extreme weather events in ways that cannot be fully insured or diversified away. The fact that Jamaica emerged from the 2017 hurricane season intact, while competitor destinations suffered catastrophic damage, illustrates both the reality of that risk and the importance of not taking any particular outcome as the norm. The Bank of Jamaica’s transition to inflation targeting is a more durable form of good news: it represents a modernisation of Jamaica’s monetary framework that will improve policy credibility and communication quality regardless of what the hurricane track chart looks like in any given September. Both developments — the escaped storm and the institutional upgrade — are part of the same underlying story: an economy that is, slowly, becoming more resilient.

The Road Ahead

The winter season of 2017-18, which the tourism industry is entering with elevated expectations following Irma’s diversion of regional demand toward Jamaica, will be a significant test of the island’s capacity to absorb a sustained surge in arrivals. The question is whether Jamaica has the hotel capacity, the trained labour force, and the transport infrastructure to convert elevated inquiry levels into actual arrivals and spend. The room count on the north coast has grown materially since 2013, and the new inventory coming online in Trelawny and Westmoreland will provide additional capacity. But if the surge in demand overwhelms the available quality product, the result will be declining visitor satisfaction rather than record revenue — a risk that the JTB and the hotel association are actively monitoring. Beyond tourism, the challenge remains to broaden the growth base. The Bank of Jamaica’s inflation-targeting transition will help monetary policy serve economic growth objectives more precisely. Whether it can shift the trajectory of a fundamentally narrow economy is a larger question.

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