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 July 2026 > or read the Caribbean Economic Overview & Caribbean Market Review summaries  for a synopsis.

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Caribbean Economic Overview

Summary:

Global economic activity has proven more resilient to the Middle East conflict than initially feared. The IMF estimates that technology and AI productivity gains are mitigating the adverse effects, though impacts vary widely across countries depending on exposure to the war and position within the AI value chain. Since its onset, the conflict has evolved from open warfare to a shaky truce marked by intermittent hostilities. Following April’s ceasefire that led to a major ease in fighting, diplomatic engagement – which culminated in the signing of a memorandum of understanding between the US and Iran in June – helped to contain spillovers, limiting disruption to the global economy. The deescalation tempered concerns in global energy markets, with oil prices retreating significantly from April’s peak but remaining elevated relative to pre-war levels. However, tensions resurfaced in July as security disputes in the Strait of Hormuz triggered renewed hostilities, signaling a breakdown of June’s agreement and prompting a partial rebound in oil prices. While the conflict has not returned to a full-scale confrontation, it remains unresolved with attacks on commercial shipping, US retaliatory strikes on Iran, and mutual accusations of ceasefire violations.

Global energy shocks and higher oil prices imply that import-dependent Caribbean economies could face intensifying inflationary pressures that threaten the region’s tourism sector and growth momentum. Economic activity generally continued to advance moderately in Q1 propelled by greater construction and tourism output, though reduced activity in most major economic sectors led to a 4.1% y/y fall-out in Jamaica in the aftermath of Hurricane Melissa. Stay-over arrivals to the region1 dipped 0.2% y/y during January to March 2026 as a sharp 27.5% contraction to Jamaica, coupled with lacklustre performances in a few other markets, outweighed growth elsewhere in the region. Similarly, outbound travel from the US – the region’s largest source market – lost momentum in Q1, with departures declining 2.1% y/y relative to a 0.3% y/y dip one year earlier. Since then, preliminary data indicate a broadly positive performance across most territories year-to-date, but arrivals to Jamaica remained negative, down 24.4% y/y at May 2026, while arrivals to Antigua and Barbuda and Barbados posted a muted outturn in H1 2026. Cruise visitor arrivals to the region1 climbed 12.7% y/y in Q1 with The Bahamas accounting for more than half the expansion, though declines in Jamaica, Turks and Caicos Islands, Trinidad and Tobago, Belize and Grenada, tempered the overall increase. Economic activity in Trinidad and Tobago likely remained subdued in Q1 partly reflecting natural gas supply constraints, but Guyana’s economy continued to post a robust expansion, buoyed by burgeoning oil production and increased output of most other economic sectors.

Regional inflation remained contained in Q1, although latest data point toward mounting price pressures, particularly in the transportation and utilities sub-indices. Average consumer prices2 rose 2.0% y/y in March 2026 up from 1.7% y/y one year earlier, with firmer inflation rates in The Bahamas, Barbados, Belize, Cayman Islands, St. Kitts and Nevis, Aruba, and the Dominican Republic. However, since then, inflationary pressures have intensified, with rates in Antigua and Barbuda, Belize and Guyana accelerating to beyond 4.0% y/y by May, while Jamaica and the Dominican Republic posted rates of 6.7% y/y and 5.7% y/y, respectively, in June, exceeding their respective central bank target ranges. Both central banks opted to hold policy rate steady in June amid the heightened global economic uncertainty.

Fiscal positions across the region generally continued to improve, although public debt burdens remained high in most territories. Barbados’ primary surplus moderated in Q1 of FY2026/27 but remained above the floor set out in its newly approved 36-month IMF Stand-By Arrangement, while the public debt-to-GDP ratio declined to 93.7% at June. Jamaica suspended its fiscal rules for FY2025/26 and FY2026/27 to support recovery efforts following Hurricane Melissa, but reaffirmed its commitment to fiscal discipline, and is expected adopt a revised path toward achieving a 60% public debt-to-GDP ratio. The Bahamas Government recorded a modest improvement in its fiscal deficit during the first nine months of FY2025/26 but maintained its expectation of delivering a US$75.5mln (0.4% of GDP) fiscal surplus for the full year, supported by anticipated Domestic Minimum Top-Up tax (DMTT) receipts of around US$130mln. After two years of deteriorating fiscal deficits, St. Kitts and Nevis recorded an improvement in its fiscal position in Q1 supported by spending restraint. However, the adjustment to structurally lower Citizenship by Investment (CBI) inflows is expected to keep fiscal deficits elevated. Trinidad and Tobago’s fiscal deficit also improved, and in June, Moody’s revised the outlook on its ‘Ba2’ sovereign credit rating from ‘negative’ to ‘stable’ citing improved external financing conditions and stronger medium-term energy sector prospects.

International reserves remained above four months of import cover in all markets and increased over the most recent 12-month period in all, except Barbados. Tight conditions persisted in the FX market in Trinidad and Tobago, but FX reserves rose modestly y/y reflecting the residual effects of the boost to inflows from the sovereign bond issuance in January 2026. Banks’ credit growth remained robust amid moderating deposit growth, and asset quality improved in most markets with non-performing loan ratios below 5% in all, except Dominica, St. Kitts and Nevis, and St. Lucia. 

The IMF’s July 2026 World Economic Outlook (WEO) Update projects that global economic growth will slow from 3.5% in 2025 to 3.0% in 2026, before recovering to 3.4% in 2027, under the assumption that the Strait of Hormuz reopened in mid-July with pre-war conditions restored by March 2027. US real GDP, in particular, is still projected to pick up pace from 2.1% in 2025 to 2.3% in 2026, reflecting technology-related productivity gains and carryover from a stronger-than-anticipated outturn in 2025. The declining inflation trend in advanced economies has now reversed, with US inflation now expected to remain above target until end-2027. However, the renewed hostilities since the IMF’s July update have cast a shadow over the global outlook implying greater downside risks, including the potential for lower growth, higher inflation, and persistent energy market disruptions. Economic growth in Caribbean economies is projected to remain moderately positive in 2026 and 2027, accompanied by a moderate uptick in inflation, in line with higher energy prices and higher US inflation. Exceptionally, economic activity in Jamaica is projected to contract by 1.2% in 2026 as the country continues to pick up the pieces following Hurricane Melissa, before rebounding by 3.1% in 2027. Also, Trinidad and Tobago is expected to post another subdued performance in 2026, before new energy projects boost growth in 2027. However, prolonged hostilities in the Middle East could intensify spillovers for the Caribbean, particularly for tourism-dependent economies, through stronger inflationary pressures, softer growth in key source markets, and weaker tourism demand.