For small, open, and highly vulnerable economies across the Caribbean, slowing productivity growth, rising global geopolitical fragmentation and accelerating external risks are not abstract challenges. They are structural pressures weighing on economic and social prospects.
Indeed, the region stands at a critical juncture. Despite important assets – abundant natural resources, a strategic geographic position, and relatively high human capital levels – it faces persistent constraints. Infrastructure gaps, tight financial conditions, and high exposure to external shocks continue to hamper the region’s development prospects.
Meanwhile, resilience challenges are becoming a daily economic reality. Between 2004 and 2024, extreme weather events increased by 84% compared to the previous two decades, causing annual average damages equivalent to 2.13% of GDP since 1980.
More and better investments: the key to sustainable development
Accelerating development in the Caribbean depends on scaling up and mobilising investment, with resilience and sustainability at its core. The challenge goes beyond volume: the composition, quality, and fragmentation of financing matter just as much.
For sure, the region has demonstrated its ability to attract international capital, with foreign direct investment (FDI) representing 4.2 of GDP in 2024 (rising to 6.3% when Guyana is included, which has been experiencing an oil boom in the last few years). Overall investment levels are relatively high, reaching 28% of GDP in 2023.
However, these investments are still not enough to meet the region’s long-term needs. Moreover, important investment gaps remain: public infrastructure spending, at just over 1% of GDP in recent years, falls far short of what is required to close critical gaps and build resilience.
The Caribbean holds significant untapped potential: unlocking it requires ambitious policy efforts
Investment aligned with the region’s sectoral strengths – including the blue economy, diversified sources of energy, sustainable tourism, and transport – could deliver a dual dividend: stronger growth and greater resilience. But this potential will not be realised on its own. Real progress depends on policy choices and collective action.
Our latest report, Caribbean Development Dynamics 2026, identifies three priority policy areas to address the region's central challenge of insufficient, fragmented and costly investment.
Regional integration must move from aspiration to implementation
By pooling joint demand, harmonising standards and strengthening institutions, Caribbean countries can achieve the scale needed to make investment projects more viable and attractive. Regional platforms can also help lower transaction costs and improve project pipelines. Initiatives such as the ONE Caribbean regional project preparation facility can support this shift by helping harmonise project structuring, promoting standardisation, increasing transparency, and catalysing public and private investment.
This is key for the region: too often, limited capacities prevent scaling up – including the technical, institutional, and co-ordination capabilities to move from concept to implementation-ready projects and mobilise finance. Improving those capacities is essential to strengthen the use of Public-Private Partnerships (PPPs) in the region, which remains limited. PPP investment averaged only 0.38% of GDP between 2010-2023, below the Latin American average of 0.54%.
Resilience must be embedded at the core of every investment decision
Delaying investment in resilience substantially increases economic and fiscal risks for Caribbean countries. In fact, underinvestment in resilient infrastructure can reduce GDP growth by nearly 1 percentage point in the first year, with even larger losses accumulating in subsequent years.
Infrastructure in the Caribbean remains more vulnerable to weather-related shocks than in most Latin American economies, underscoring the urgency of resilient investment strategies which are both cost-effective and critical to safeguarding development gains. Investments in resilient infrastructure, early warning systems, and data and statistical systems are essential to better prepare against extreme weather events.
The scale of the investment challenge requires a broader and more diversified financing ecosystem
Domestic resource mobilisation, more private-sector project financing, and international capital flows all play key roles. In this regard, the Caribbean has emerged as an important frontrunner in financial innovation.
Countries across the region are increasingly using innovative debt financing mechanisms, including green, social, sustainability, sustainability-linked and blue bonds (GSSSB), debt-for-nature swaps, and clauses for resilience. The IDB Group has participated in five of the ten most recent market-based debt swap operations in the region, working with other multilateral development banks, private investors, and guarantors. These tools are not silver bullets – but they demonstrate that innovation is possible, even in constrained environments:
- The first regional international GSSSB bond issuances took place in 2020, and by 2024 cumulative international issuance had reached USD 2 billion.
- Debt-for-nature conversions unlocked over USD 450 million for nature and marine conservation in Belize, Barbados, and the Bahamas.
- Jamaica triggered the full payout of a USD 150 million catastrophe bond after Hurricane Melissa in October 2025.
Supported by sound regulatory and oversight frameworks, these tools can improve access to finance while helping countries better manage climate and disaster risks.
Sharing the Caribbean’s experience
Beyond the region’s own sustainable development agenda, such experiences of enhancing competitiveness, managing risk, financing resilience, and mobilising investment also offer valuable lessons for global development and financial systems. Sharing them is one of the objectives of the 18th International Economic Forum on Latin America and the Caribbean, to be held in Paris on June 2nd, 2026, at the invitation of the OECD Development Centre, the IDB and the Agence française de développement.
As regional partnerships strengthen in the Caribbean, financial innovation accelerates, and the region’s development priorities receive increased international attention, the time has come to move to implementation, ensuring that investment delivers not only growth, but also resilience, sustainability, and opportunity for current and future generations.
All figures in this blog are drawn from the Caribbean Development Dynamics 2026 report.
The Caribbean Development Dynamics 2026 report is jointly produced by the OECD Development Centre and the Inter-American Development Bank, in partnership with the Caribbean Development Bank and the Spanish Agency for International Development Cooperation (AECID).
