Caribbean Market Overview: An Economic Review for Investors

Interested in an economic overview of the Caribbean Market? We provide the latest detailed information for Corporate and Investment clients in our quarterly review.

You can download the latest edition Caribbean Market Overview April 2026 > or read the Caribbean Economic Overview & Caribbean Market Review summaries  for a synopsis.

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Caribbean Economic Overview

Summary:

The outbreak of war in the Middle East at the end of February 2026 disrupted the global economy’s steady growth momentum which prevailed in 2025 despite dramatic trade policy shifts and persistent geopolitical tensions. The IMF estimates that global real GDP growth stabilized at 3.4% in 2025, following a similar expansion in 2024, as increased AI-related investment gains offset the adverse effects of shifting global trade dynamics. However, US-Israeli coordinated strikes on Iran’s leadership and military assets rapidly escalated into a regional conflict, marked by Iranian attacks on Israel and US bases in the Gulf, the effective closure of the Strait of Hormuz, and counterstrikes on production facilities in Iran. The disruption of oil flows through this vital chokepoint triggered a sharp surge in prices, with Brent crude peaking at near US$120/barrel in March, before a modest easing following the April 8 ceasefire announcement. Above-target US inflation persisted into 2026, but accelerated to 3.3% y/y in March 2026, echoing the fuel price shock. After three consecutive cuts in late 2025, the Fed held interest rates steady since then, reflecting a cautious stance amid the higher energy prices and elevated geopolitical uncertainty. However, conditions remain fluid, with the ceasefire extended beyond the initial two-week period to support ongoing negotiations.

Caribbean economies generally continued to expand in 2025, with growth moderating as the post-pandemic rebound matured. While tourism continued to anchor the expansion, construction activity emerged as the primary engine of growth where capacity and source-market uncertainty limited the tourism outturn. Stay-over arrivals to the region¹ increased by 0.3% in 2025, a sharp deceleration from 7.4% growth one year earlier. Similarly, outbound travel from the US – the region’s largest source market – posted a flat performance following a robust 9.2% expansion in 2024. However, the outturn masked an uneven performance across the region as declines in Antigua and Barbuda, The Bahamas, Jamaica, Grenada, St. Lucia, and Turks and Caicos Islands largely offset gains elsewhere. Exceptionally, arrivals to Jamaica fell 10.3%, driven by a 41% contraction in Q4 in the aftermath of Hurricane Melissa. Latest available year-to-date data indicate a broadly positive performance across most territories, but arrivals to Jamaica diverged, collapsing 31.4% y/y at February 2026. Cruise passenger arrivals to the region¹ climbed 8.8% in 2025 with The Bahamas accounting for two-thirds of the expansion, though declines in Antigua and Barbuda, Cayman Islands, Jamaica, and St. Lucia tempered the overall increase. Higher energy output, supported by the start-up of two new gas fields in Q2, led to a modest uptick in economic activity in Trinidad and Tobago over the first nine months of the year. In contrast, Guyana remained a clear outlier, recording a sixth consecutive year of double-digit growth, propelled by burgeoning oil production.

Regional inflation remained modest in 2025 in line with easing global commodity price pressures. Average inflation² decelerated to 1.6% y/y in December 2025 from 1.9% y/y one year earlier, reflecting slower growth in all markets except Barbados, Curaçao, and the Dominican Republic. In the immediate aftermath of Hurricane Melissa, Jamaica’s inflation rate spiked from below the Bank of Jamaica’s (BOJ) 4% to 6% target range fuelled by higher agricultural prices, but eased since then as supply conditions improved. Accordingly, the BOJ lowered its policy rate by 25bps in February 2026 to support the economic recovery but opted not to adjust it in March given the heightened uncertainty and increased volatility in global commodity markets.

Sovereign risk profiles in the Caribbean generally improved in 2025, though public debt ratios remained elevated in most territories. Several governments secured sovereign credit rating upgrades including Aruba, The Bahamas, Barbados, Dominican Republic, Jamaica and the Turks and Caicos Islands. In December, following Hurricane Melissa, Moody’s upgraded Jamaica’s rating from ‘B1’ to ‘Ba3’ with a stable outlook assessing that while the storm weakened short-term metrics, underlying credit fundamentals remained intact. Meanwhile, S&P Global Ratings affirmed Jamaica’s ‘BB’ rating, but revised the outlook from ‘positive’ to ‘stable’ signaling a reduced likelihood of a near-term upgrade. Most recently, in April, Moody’s upgraded The Bahamas sovereign credit rating from ‘B1’ to ‘Ba3’ assigning a stable outlook, citing sustained fiscal consolidation that has placed public debt on a downward trajectory. In contrast, in December, Moody’s affirmed Trinidad and Tobago’s ‘Ba2’ rating, but revised the outlook to negative – following similar action by S&P Global Ratings in September – citing rising foreign exchange liquidity risks amid delays in restoring energy output. Further, fiscal positions across parts of the Eastern Caribbean Currency Union weakened, reflecting increased spending on public investment and post–Hurricane Beryl reconstruction, alongside sharp declines in Citizenship by Investment inflows.

International reserves of most territories increased and/or remained elevated over the most recent 12-month period. In Trinidad and Tobago, local FX market conditions remained constrained with Central Bank interventions contributing to the long-term erosion of FX reserves. However, reserves increased recently supported by the stabilization of energy export earnings and a temporary uplift from a US$1bln sovereign bond issuance in January 2026. Banks’ loan growth sustained a strong performance, while deposit growth moderated, and asset quality and profitability improved in most markets.

In its April 2026 World Economic Outlook (WEO), the IMF lowered its global real GDP growth forecast, cautioning that the outlook is contingent on the Middle East conflict remaining contained in scale and duration. Global growth is now projected to slow from 3.4% in 2025 to 3.1% in 2026, before a slight pick-up to 3.2% in 2027. US real GDP growth was also revised downward but is still projected to pick up pace from 2.1% in 2025 to 2.3% in 2026 reflecting carryover from a stronger-than-anticipated outturn in 2025. Higher global energy prices linked to the war have interrupted the previously expected decline in inflation in advanced economies, with US inflation now projected to increase from 2.7% in 2025 to 3.2% in 2026, before subsiding to 2.1% in 2027. Economic activity in the Caribbean is projected to continue to advance moderately in 2026 and 2027, accompanied by a modest upturn in inflation, in line with higher energy prices and higher US inflation. In Trinidad and Tobago, medium-term prospects appear more favourable linked to new projects expected to become operational in 2027. Also, in February 2026, the US issued new licenses to allow the twin-island republic to pursue oil and gas activities in Venezuela, following the revocation of previous licenses in April 2025. However, the heightened uncertainty surrounding the war in Iran poses material risks to both the global and regional outlooks. A collapse of the current ceasefire could escalate and prolong hostilities driving global energy prices even higher. A sustained rise in shipping costs due to war-risk premiums and re-routing, could also raise the cost of food and other imports, intensifying spillovers for regional inflation and growth, with potential adverse implications for fiscal positions.