- Hurricane Melissa was an unprecedented shock for Jamaica, causing severe damage and testing the country’s ability to respond and recover under extreme conditions.
- However, prior investments in disaster risk financing enabled a rapid and coordinated response, making significant resources available for immediate relief and early recovery efforts.
- Still, the scale of losses far exceeded available funding, underscoring the need to further strengthen financing mechanisms and support a more resilient recovery.
Jamaica’s economy has been hit by various external headwinds over the last 12 months, including uncertainty amid a changing international trade landscape, setting back its short-term growth prospects. Yet there is little doubt that the largest shock was Hurricane Melissa, which impacted the island nation on October 28, 2025 — the most extreme tropical system to make landfall in Jamaica’s history.
How prepared was Jamaica to face an event of this magnitude? Beyond the immediate devastation, Hurricane Melissa put to the test the country’s capacity to respond, absorb losses, and begin recovery under extreme conditions.
In the aftermath, key questions emerge: not only on how Jamaica responded, but how prior precautionary interventions shaped that response. The answer points to a broader story about resilience, the role of disaster risk financing, and what it takes for small island economies to confront increasingly severe natural hazard events.
Hurricane Melissa was one of the most devastating hurricanes ever to hit Jamaica. It made landfall as a Category 5 storm, with sustained winds of 295 km/h, tearing through the island’s western end from south to north.
Compared to the last major hurricane to strike Jamaica, Hurricane Gilbert in 1988, Hurricane Melissa was significantly more intense. Yet while Gilbert, a Category 3 storm, caused damage estimated at 65% of GDP, Hurricane Melissa is estimated to have caused US$12.2 billion in total damage and losses — equivalent to approximately 56.7% of Jamaica’s 2024 GDP (as estimated in March 2026).
Resilience has been built through a comprehensive disaster risk financing strategy. In 2022, Jamaica publicly unveiled the National Natural Disaster Risk Financing Policy (DRF). The DRF policy introduced a multilayered strategy for disaster risk financing, with a framework addressing relief, recovery, and reconstruction across a variety of natural hazard events. The framework’s scope covers all events, from high-frequency, low-severity events such as sustained rains, to low-frequency, high-severity events such as the recent Hurricane Melissa.
The framework is based on the concept of ‘risk layering’, meaning that different levels of risk are covered by different financial instruments, with each instrument designed to be best suited to the risk it is intended to address. For low-severity, high-frequency natural disasters, the government assumes the cost of disaster-related damage either through government resources or by accessing finance. For high-severity, low-frequency events, it transfers risk by accessing coverage through various insurance facilities. In the event of a qualifying natural disaster, the Government receives a payout for relief, recovery, and reconstruction (Table 1).
The multi-layered financing framework made available up to US$662 million in government resources and financing for immediate recovery efforts after Hurricane Melissa (see Table 2). In addition, in January 2026, the IMF approved a US$415 million disbursement to Jamaica for hurricane relief and recovery efforts, increasing total available resources to US$1.077 billion.
In essence, Jamaica established strategic provisions and institutional changes to enable a rapid response to natural disasters and secure financing for disaster relief. It became the first Caribbean country to issue a catastrophe bond in 2021, covering three hurricane seasons through 2023. This bond was renewed in May 2024 for US$150 million, extending coverage to four hurricane seasons from 2024 to 2027, and was fully triggered by Hurricane Melissa.
Although the scale of damage caused by Melissa far exceeded the bond’s coverage, this type of precautionary instrument remains critical for Caribbean economies, which are increasingly vulnerable to natural disasters.
The estimated damage and losses of US$12.2 billion exceed the current available resources of US$1.08 billion. Nevertheless, the government’s creation of the DRF was instrumental in providing immediate support to address Jamaica’s most urgent challenges, such as providing medical attention, shelters, food security, and prioritizing the restoration of energy, water, and transport. This has helped mitigate the impact of the hurricane on the economy and allowed citizens to move ahead quickly to the recovery phase.
Several economic activities in western Jamaica have been affected by Hurricane Melissa, including key sectors such as agriculture and tourism, as the hurricane made landfall in this part of the country, where a large share of food production and tourism activity is concentrated. Preliminary government estimates indicate that quarterly GDP contracted between 8% and 13% in the last quarter of 2025, as crops and hotels suffered severe damage. GDP growth is projected to contract by 4.5% in Fiscal Year 2025/26 (which runs from April 2025 to March 2026), before recovering to 3.3% in Fiscal Year 2027/28.
Drawing on the experience in the aftermath of Hurricane Gilbert, high levels of resources will be critical to build back better in the first 3-4 years post-Melissa, potentially raising labor productivity in the short run. Importantly, this event may be an opportunity to strategically direct resources towards the development of productive infrastructure that could ultimately strengthen Jamaica’s long-term economic landscape, institutions, and competitiveness. The government has secured up to US$6.7 billion over three years from multilaterals, including the IDB, which they plan to spend on medium-term recovery and reconstruction, with up to US$2.4 billion for the private sector.
Overall, Hurricane Melissa was a catastrophic natural disaster from which Jamaica will take several years to recover. But Jamaica had developed an exceptional financing framework that made critical resources available to the government in the immediate aftermath of the disaster to support relief efforts. Furthermore, the government’s strong track record on fiscal management has paved the way for the availability of even more resources, which are expected to go a long way in accelerating Jamaica’s recovery and strengthening its resilience to extreme natural hazard events.
These issues are examined in greater detail in the latest edition of the Caribbean Economics Quarterly, "How Are External Forces Impacting Trade, Growth, and Investment in the Caribbean?"
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Economic Analysis