Climate shocks, Global uncertainty among pressures on Caribbean Economies – CDB

In 2025, tourism-dependent economies like St Vincent and the Grenadines (SVG), expanded slowly as momentum in the sector eased, said the Caribbean Development Bank (CDB).

Presenting the Bank’s regional economic review at its annual news conference in Barbados earlier this month, acting Deputy Director of Economics Jason Cotton, warned that “risks remain tilted to the downside” due to geopolitical tensions, climate-related disasters and continued global uncertainty.

He said that fiscal pressures are also expected to persist in several countries due to post-disaster recovery costs, rising public sector wages and declining revenues from citizenship-by-investment (CBI) programmes. SVG plans to implement CBI programme by mid-2026.

Going further, Cotton said regional growth, excluding in Guyana, decelerated to 0.6 per cent in 2025, down from 1.4 per cent in 2024.

When Guyana’s oil-driven economy is included, overall regional growth reached 4.7 per cent, but Cotton stressed that the Caribbean economy slowed significantly in 2025 as global uncertainty, climate shocks, and weaker tourism growth weighed on regional performance.

He noted that Guyana’s economy, although expanding at a slower pace than in 2024, still recorded double-digit growth, helping to lift the regional average.

Across the Caribbean, economic outcomes varied, but Cotton noted that commodity-exporting countries such as Suriname recorded stronger activity due to continued oil-related investment, while Trinidad and Tobago experienced muted growth.

Cotton also pointed out that climate events also impacted performance as Jamaica, still recovering from a previous hurricane, was struck again by Hurricane Melissa, pushing the country into its second consecutive year of economic contraction.

It was, however, noted that despite the slowdown, inflation pressures eased across the region as average inflation declined to 3.4 per cent, down from the peak of 9.6 per cent recorded in 2022, reflecting global trends.

“However, fiscal conditions showed signs of strain. Excluding Guyana, the region’s primary fiscal surplus narrowed to 1.3 per cent of GDP as government spending grew faster than revenues. When Guyana’s large capital spending programme is included, the surplus fell further to 0.2 per cent of GDP,” Cotton said.

He stressed that regional debt levels also remain a concern. Although central government debt declined slightly to 46.6 per cent of GDP, nine Caribbean countries still carry debt levels above 60 per cent of GDP.

Looking ahead, the CDB projects modest economic growth in 2026. Excluding Guyana, the Caribbean economy is forecast to expand by 1.1 per cent. With Guyana’s expected growth of over 20 per cent, regional growth could reach 6.2 per cent.

Tourism and construction are expected to remain key drivers for service-based economies, while commodity exporters will depend heavily on global price trends.

Cotton warned, however, that risks remain tilted to the downside due to geopolitical tensions, climate-related disasters and continued global uncertainty. Fiscal pressures are also expected to persist in several countries due to post-disaster recovery costs, rising public sector wages, and declining revenues from citizenship-by-investment programmes.

The CDB official emphasized that Caribbean countries must strengthen resilience through improved project implementation, economic diversification and stronger fiscal institutions.

“Resilience is built through credible policy choices, stronger institutions, disciplined execution and investment in our people,” Cotton said, adding that regional cooperation will be essential in navigating an increasingly uncertain global environment.

Meanwhile, CDB Director of Projects O’Reilly Lewis reported that the bank significantly expanded financing in 2025, approving US$464 million in funding, a 50 per cent increase over 2024, while disbursements reached US$429 million, up 30 per cent.

Major projects approved include US$47 million to improve climate resilience at the Canouan Airport.