PIOJ warns of significant economic challenges if global oil prices remain elevated

Durrant Pate/Contributor

The Planning Institute of Jamaica (PIOJ), Jamaica’s primary economic planning apparatus, is warning of calamity for the economy if global oil prices remain elevated for an extended period.

Director General, Dr Wayne Henry, who delivered the warning, sets out the likely consequences with respect to the current shock to oil prices associated with the ongoing geopolitical tensions in the Middle East, while giving his quarterly update on the economy on Wednesday.

He cited, “heightened energy costs will spur inflation; widen Jamaica’s trade deficit; slow real GDP growth; and place a strain on fiscal performance. The tourism sector, a major source of foreign exchange earnings for Jamaica, will likely be among the hardest hit. Higher airfares, cruise costs, and local operating expenses are projected to negatively impact visitor arrivals.” 

Urgent need for proactive  policy measures

Generally, most industries will be adversely affected by rising energy costs and other critical imported inputs such as fertiliser due to supply-chain constraints as a result of the conflict with Dr. Henry emphasising, “these risks highlight the urgent need for proactive and integrated policy measures. Jamaica will need to accelerate its renewable energy transition, strengthen agricultural and tourism linkages, diversify visitor markets, and maintain vigilant monetary and fiscal management.”

By embedding energy resilience into tourism and production strategies, the PIOJ boss contended that Jamaica can mitigate the anticipated effects of oil price volatility, protect livelihoods, and secure a more sustainable path toward inclusive growth.

According to him, “at this stage, the economy is still anticipated to grow within the range of 1.0% to 3.0% for FY 2026/27, largely associated with the expectation for relatively robust growth in the latter half of the fiscal year (October 2026 to March 2027). However, if current conditions persist during the upcoming quarters then there will likely be a downward revision.”

Latest economic performance

The preliminary data presented by the PIOJ on economic performance for the January to March 2026 quarter indicate that the economy continued to recover from the effects of Hurricane Melissa, which occurred on October 28 last year. For the April–June 2026 quarter, it is expected that the economy will continue to record a contraction, albeit at a lower rate, as industries continue to recover. 

Given the preliminary out-turn for January to March 2026, the economy is now estimated to have contracted by 1.7 per cent for Fiscal Year 2025/26. 

This revised projection compares with an initial projection for growth of 1.9 per cent, indicating that the shock of Hurricane Melissa resulted in a loss of 3.6 percentage points in Real Value Added output for FY 2025/26. 

The economy was previously projected to grow strongly during the latter half of the fiscal year (October 2025 to March 2026), attributable to the low levels of output in the corresponding period of 2024/25 due to Hurricane Beryl.