Over the last three years, Jamaicans have withstood the devastating impact of Hurricanes Melissa and Beryl and tropical storm Raphael on the economy. These challenges raise an important question: How does public policy support growth in a small open economy (SoE) that is extremely vulnerable to external shocks and climate change?

Any answer must confront a simple fact: the Jamaican economy has not grown significantly for at least two decades. Discounting shocks from the 2008-2010 financial crisis and COVID-19, the story is one of anaemic growth. Between fiscal years 2010-11 and 2018-19, growth varied between -0.7 per cent and 2 per cent and was 1 per cent or less for seven of nine years. After an 11 per cent decline during COVID, recovery rates between 2020-21 and 2022-23 merely reflected a very low base. Growth then returned to -0.5 per cent in 2023-24 and 0.5 per cent in 2024-25. While Melissa’s full impact is unclear (56.7 per cent of GDP according to ECLAC), growth projections remain modest.

Jamaica’s characteristics shape its growth path. It is a price taker: it cannot set international prices but can export competitively at current ones, so binding constraints are mostly on the supply side. The economy supplies three types of goods: a traded export good consumed abroad (largely tourism); a non-traded good (education, health, construction); and imports of consumption and intermediate goods, with little short-run substitution. Because almost all production depends on imports, diversification is difficult.