• Three major shocks tested the Caribbean economy in 2025 — from Hurricane Melissa, the strongest storm ever to hit Jamaica, to renewed geopolitical tensions and shifts in tariff policy — yet the region as a whole managed to absorb their impact.
• Looking ahead, the region’s outlook will be shaped by global conditions, including U.S. growth, tourism flows, commodity prices, and evolving trade dynamics.
• At the same time, greater diversification within tourism and services, along with broader trade ties, could help Caribbean economies build resilience and provide some insulation from global tensions.
The global economic landscape in 2025 has been characterized by continued volatility and increased uncertainty across global markets. In this context, and amid significant shifts in tariff policy, concerns may arise that the six IDB-member Caribbean countries — The Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad and Tobago — could be particularly exposed. Indeed, together they comprise only 1.5% of Latin America and the Caribbean’s GDP and 1% of its population.
To give a sense of scale, the most populous country, Jamaica, has roughly the population of Miami-Dade County, the closest urban center, a few miles north in the United States. Seen through this lens, the concern may be that they are especially vulnerable to the changing winds of geopolitical and trade alliances.
Yet so far these economies have shown remarkable resilience in recent months despite their openness (Figure 1), resulting in minimal effects on local economies as discussed in more detail in the latest Caribbean Economics Quarterly: “How external forces are impacting growth, trade, and investment in the Caribbean”. Still, there are many risks and opportunities ahead.
Global activity has been holding up better than expected. Despite some moderation of U.S. growth in 2025, the International Monetary Fund is forecasting global growth to remain steady at 3.3% in 2024, 2025, and 2026. Growth in the United States, the Caribbean’s main trade and investment partner, is expected to be weaker in 2025 than in 2024 and to rely partly on temporary factors, such as front-loaded consumption in the first half of the year and a surge in digital investment driven by just a handful of companies.
However, the region has so far managed to dodge the effects of three major shocks. First, recent shifts in international tariff policies. The Caribbean depends heavily on international trade, yet only a small share of goods destined for the United States — less than 5% of total exports — was directly affected by these tariffs. The region exports mostly services, fossil fuels, and gold, which were not subject to tariffs (Figure 2). Still, some smaller exporters in sectors such as seafood and rum were significantly affected.
A second major shock came from storms. By far the most significant regional event affecting the Caribbean was Hurricane Melissa, the worst storm ever to make landfall in Jamaica, which struck in late October 2025. Total damages, estimated at around 41% of GDP, severely disrupted agriculture, services, and Jamaica’s critical tourism sector, although the overall damage was lower than in earlier episodes, given the strength of the storm.
Finally, geopolitical developments in the broader region raised security risks. Venezuela, which holds the world’s largest proven oil reserves and is a close neighbor to the Caribbean, has pledged to boost production in the coming years after more than three decades of declining output. However, even with some recovery, Venezuela remains too small a producer to significantly shift global oil markets, accounting for roughly 1% of global crude supply. Moreover, direct trade between Venezuela and the Caribbean remains minimal.
For the Caribbean, 2025 was a mixed year. Most economies continued to expand, supported by strong tourism performance in The Bahamas and Barbados, robust offshore oil production in Guyana, stable non-energy activity in Trinidad and Tobago, and high investment in Suriname.
However, the devastating hurricane in Jamaica is estimated to reduce GDP growth by about 3 percentage points in the 2025 calendar year, with output projected to contract by 1.3%. As a result, Caribbean economies excluding Guyana are estimated to have grown by 0.7% in 2025, down from the 1.6% forecast before Hurricane Melissa made landfall. Guyana, by contrast, is estimated to have expanded by about 19%, according to government figures.
For 2026, the region’s vulnerability to external shocks remains high. The biggest game changers could be changes in demand from advanced economies, especially the United States, geopolitical tensions, and shifts in China’s demand for commodities, which can have a major impact on commodity prices. Three of the six countries — Guyana, Trinidad and Tobago, and Suriname — depend heavily on energy and commodity exports.
If labor markets in major trading partners weaken and cautious investor sentiment outside the Artificial Intelligence (AI) sector prevails, it could be a rough ride. If inflationary pressures from import price pass-through due to tariff-induced price hikes do not ease, the outlook could become even more challenging.
Growth in the U.S. is expected to come mostly from investment in AI rather than from consumption, which has historically been the major growth driver of its economy. This matters for tourism-dependent countries, because visitor spending is what boosts the sector. Some forms of tourism, such as all-inclusive packages and cruise visits, may be particularly sensitive to changes in U.S. employment and household income.
Meanwhile, oil prices are expected to remain low over the medium term and could decrease further on account of sluggish global demand growth, particularly from China, and ample and growing supply. Global natural gas production is also expected to grow over the next two years, dampening prices. This will alleviate current account pressures for oil-importing Caribbean countries. By tempering the oil boom in Guyana, lower prices could also reduce macroeconomic volatility.
Strengthening resilience will be critical for Caribbean countries as they navigate future shocks and an uncertain global environment. Jamaica certainly has a long road ahead as it begins its reconstruction journey. However, the country has been an example of resilience, and its credible fiscal framework, concerted planning in the face of shocks, and improved early warning systems will help it cope with headwinds. The Bahamas and Barbados have also made headway in strengthening resilience to natural disasters.
Amid these challenges, opportunities remain. Diversification within tourism and services, technology-focused foreign direct investment, Guyana’s continued oil expansion, and large oil investments in Suriname present important upside potential. The Caribbean’s geographic diversification in trade also offers some insulation from global tensions. The resilience the region has shown in recent years in the face of natural disasters will also serve it well going forward.