Greater investment is essential for Caribbean countries to strengthen resilience, close infrastructure gaps and achieve sustainable growth, according to a new report by the OECD Development Centre and the Inter-American Development Bank (IDB).
Caribbean Development Dynamics 2026 finds that while the region enjoys rich natural resources, strong human potential and integration into global markets, it faces significant constraints. Small market size, modest productivity, and growing exposure to climate and external shocks weaken long-term development prospects.
Between 2004 and 2024, climate-related extreme weather events increased by 84% compared to the previous two decades, resulting in average annual damages equivalent to 2.13% of GDP over the last 40 years. Potential GDP per capita growth was a modest 1.4% in 2025, below that of advanced economies. Public debt remains relatively high despite consolidation efforts in different countries, averaging 68.6% of GDP in 2024, 14.5 percentage points above the Latin American average and 4 percentage points above 2014 levels.
In 2023, total investment in the Caribbean averaged 28% of regional GDP, above the OECD (23%) and Latin American (20.7%) averages. However, much of this investment is short term or externally financed and does not fully address long-term development needs. The private sector finances nearly 80% of total regional investment, above Latin America’s average but below the OECD level. Strategic public infrastructure investment is comparatively low, averaging just over 1% of GDP between 2015 and 2021.
Foreign direct investment (FDI) plays a critical role in the region. Net inflows reached 6.3% of GDP in 2024 (4.2% excluding Guyana), above the Latin American average, mainly concentrated in services such as tourism, information communication and technology (ICT) and financial services. FDI can help bridge investment gaps, support strategic areas like digital transformation, renewable energy, and export diversification, while fostering quality job creation.
Caribbean Development Dynamics 2026 highlights three priorities to strengthen investment in the region.
Focus on resilience and sustainability
Investments in climate-resilient infrastructure and early warning systems are essential to safeguard livelihoods and regional development gains. Public-private partnerships (PPPs) can help mobilise private finance, yet PPP investment remained below 1% of GDP between 2010 and 2023. Strengthening project preparation and improving project performance evaluation is key to scaling up PPPs across the region.
Targeted investments in sectors where the region shows strong potential can unlock significant development opportunities. These include sustainable tourism and creative industries, activities that support the energy transition, sustainable transport, the blue and circular economy, sustainable agriculture and food systems, as well as digital transformation and artificial intelligence.
Expand and diversify sources of financing
Tax revenues in the Caribbean averaged 20.7% of GDP in 2023, below OECD and Latin American levels. Improving domestic resource mobilisation and streamlining tax incentives can enhance fiscal sustainability.
At the same time, the report showcases a number of successful examples regarding the use of innovative financial instruments across the region that can be emulated by more Caribbean countries: Between 2019 and 2024, the Caribbean’s international market for green, social, sustainability, sustainability-linked and blue bonds (GSSSB) reached USD 2 billion. Beyond thematic bonds, Caribbean countries have been frontrunners in developing innovative tools to access finance while building resilience. The Bahamas, Barbados and Belize have pioneered debt-for-nature swaps, while Grenada and Barbados have led the use of climate-resilient debt clauses. Moreover, Guyana and The Bahamas have issued carbon credits, and Jamaica triggered a full payout under its catastrophe bond following Hurricane Melissa in October 2025.
Deepen regional integration and international partnerships
Seizing the development potential of the Caribbean through more and better investment is not just a country-specific challenge, but a regional one. Regional and international co‑operation can play a key role in promoting resilient infrastructure and disaster risk management. It can also help mobilise investments through shared innovative financing instruments and improved access to global climate funds.
Partnerships can also play a catalytic role in attracting quality investment and expanding the use of PPPs, and can help in strengthening institutions and in building statistical capacity, as collaboration across borders enables countries to pool expertise, share methodologies, and benefit from economies of scale in data production and innovation. Finally, closer engagement with multilateral, regional and national development banks is also essential to help Caribbean countries access financing and technical assistance for complex projects.
