This chapter analyses the Caribbean’s macroeconomic and structural conditions in the context of modest potential economic growth. It examines the role of low productivity in constraining economic activity and assesses the relevance of fiscal and monetary policy in promoting sustained economic growth. It also emphasises the importance of enhancing quality investment and aligning it with development goals. Then, the chapter delves into the region’s economic structure, focusing on the limited diversification of service-based and commodity-exporting economies, and examines how these characteristics influence their external balances and trade dynamics. Finally, the chapter addresses the low levels of internationalisation and innovation among Caribbean firms and the persistent barriers to business growth.
Caribbean Development Dynamics 2025
Abstract
Macro-structural conditions in the Caribbean are strongly influenced by the global context. The relatively small size of most Caribbean economies, coupled with their dependence on external markets, makes economic conditions in these countries volatile and highly susceptible to global downturns. In this context, strengthening macro-structural conditions in the Caribbean is vital to ensuring sustainable and inclusive growth, reducing vulnerabilities, attracting quality investments, and creating formal jobs, among other objectives.
This chapter analyses macro-structural conditions in Caribbean countries. The first section explores the importance of boosting productivity, strengthening fiscal and monetary policies, managing public debt sustainably, and establishing the conditions necessary to attract investments, which are all key drivers of sustained and higher long-term potential growth. The second section examines the economic structure of Caribbean countries, which are predominantly service-based and commodity-exporting economies. This section highlights the importance of upgrading production structures, improving diversification, enhancing integration into regional and global value chains, and fostering an environment where firms can innovate, expand, and better connect with global markets.
The Caribbean's economic trajectory exhibits volatility and heterogeneity, posing a challenge for long-term growth
Potential growth in Caribbean economies is relatively low and has declined in recent years. The region's average potential gross domestic product (GDP) per capita growth is estimated at 1.4%. This is slightly above the Latin American average (1.1%) and below the 1.8% estimated for the average of advanced economies (Figure 1.1). Modest potential growth implies that Caribbean economies will find it challenging to converge with the per capita income levels of advanced economies and thus must develop new engines of economic growth.
Note: Potential GDP growth is the growth rate the economy can sustain over the long run, excluding short-term effects linked to a difference between demand and the potential supply level. The variable refers to the growth in potential output, which is the maximum output level an economy can reach without putting strain on production factors that translate into inflationary pressures.
Average growth is a simple average of growth in all countries for each group over the period analysed. HP=the Hodrick-Prescott filter, which was used as an alternative model due to its resilience to short-term shocks to create a smoothed curve (lambda 100); AR=autoregressive model, which uses GDP per capita growth data. The number of lags (one) was determined by analysing the autocorrelation function and choosing the model that maximised the log-likelihood.
Source: Authors’ calculations based on IMF (2024[1]).
Over the last decades, GDP and GDP per capita growth in the Caribbean have been modest and heterogeneous. Average annual real GDP growth between 2000 and 2023 was 2.5% in the Caribbean, similar to the Latin American average for the same period. The average GDP per capita in the Caribbean increased from constant USD 15 000 to USD 21 800 between 2000 and 2023. While this was a larger relative increase than what was observed in OECD countries, in absolute terms, this was smaller than the increase in the OECD (from USD 40 000 to USD 53 000), hence widening the income gap between both regions (Figure 1.2, Panel A).
The average GDP per capita in the Caribbean has remained higher than that of Latin America over the same period, although there is significant heterogeneity across countries (Figure 1.2, Panel A). In 2023, individual country figures ranged from USD 2 934 to USD 49 811 per capita, highlighting the economic disparities within the Caribbean. Indeed, the Caribbean has economies ranging from lower middle-income levels (Haiti) to upper middle-income (Belize, Dominica, the Dominican Republic, Grenada, Jamaica, Saint Lucia, Saint Vincent and the Grenadines, and Suriname) and to high-income (Antigua and Barbuda, the Bahamas, Barbados, Guyana, Saint Kitts and Nevis, and Trinidad and Tobago) (World Bank, 2023[2]).
Historically, the region has experienced greater annual GDP growth volatility than Latin America and advanced economies. From 2000 to 2023, the standard deviation of GDP growth in the Caribbean averaged 6%, in contrast to 4% in Latin America and 2% in advanced economies. Moreover, disparities among countries in the Caribbean are significant. For instance, Guyana exhibited a GDP growth standard deviation of 15% over the same period – mostly related to positive developments linked to oil discoveries and increased oil production – while the figure for Saint Vincent and the Grenadines was 3% (Figure 1.2, Panel B). This heightened volatility in the Caribbean is primarily attributed to small market sizes, heavy reliance on tourism and external financing, limited economic diversification and high exposure to climate threats. These factors make the region more vulnerable to external shocks and prone to fluctuations.
Low productivity is at the core of low potential growth
The region has historically exhibited low productivity, constraining the potential for sustained high economic growth. Relative to OECD countries, Caribbean economies show a widening gap: average labour productivity in the Caribbean represented almost 50% of that of the OECD in the early 90s, and this level declined to around 38.3% in 2021, with an improvement in 2022 (42%) and 2023 (46%) (Figure 1.3). Structural heterogeneity is a significant feature in the region, with low-productivity economies coexisting alongside higher-productivity ones.
Several factors explain such low productivity levels, including an economic structure highly dependent on external demand, inadequate infrastructure limiting market access and knowledge spillovers, limited access to finance for innovative and productive activities, a high level of informality in the labour market, and significant vulnerability to natural disasters (ILO, 2023[4]; Rosenblatt et al., 2023[5]; Ianchovichina, 2024[6]).
Given these factors, accurately measuring productivity is complex. Economic events tend to affect small economies disproportionately. For example, Guyana's recent productivity surge reflected oil discoveries and increased production and has, in turn, positively affected the region’s average productivity since 2021 (Figure 1.3). Moreover, aggregate productivity figures can be biased by sectors that generate low employment, profits and value-added. Finally, standard productivity metrics fail to account for changes in external demand, commodity prices, or the impact of natural disasters, which all play an important role in shaping the region’s development dynamics (Rosenblatt et al., 2023[5]).
Note: Productivity is measured by GDP per person employed (constant 2021 PPP USD). Max = maximum value among the Caribbean countries per year. Min = minimum value among the Caribbean countries per year.
Source: Authors’ elaboration based on World Bank (2023[3]).
Fiscal policy is a fundamental ingredient for sustained growth
Many Caribbean economies face persistent challenges associated with high deficit and debt levels. This situation is largely the result of macroeconomic vulnerabilities, costly financial crises, and frequent natural disasters that disrupt economic activity and erode fiscal buffers (Acevedo, LaFramboise and Wong, 2017[7]). Effective fiscal policy is therefore crucial for sustained growth. Governments need to be able to invest in development objectives while building resilience to economic shocks without compromising financial stability.
Fiscal balances vary considerably across countries. In 2023, the region's overall fiscal deficit narrowed to 1.6% of GDP, from 2.4% in 2022. This was largely due to reduced primary expenditure following the end of COVID-19 emergency programmes and anti-inflationary measures in 2022, alongside decreased capital expenditure (ECLAC, 2024[8]). This progress is particularly pronounced in service-exporting nations benefiting from strengthened international tourism. By 2023, several countries improved their fiscal positions: Grenada recorded a surplus of 8.4% of GDP, and Saint Kitts and Nevis maintained a positive balance of 0.9%. In addition, countries such as Suriname are achieving substantial primary surpluses under programmes supported by the International Monetary Fund, which require fiscal consolidation efforts (ECLAC, 2024[8]). In contrast, some countries like Dominica and Saint Vincent and the Grenadines still faced significant challenges, with deficits of -7.3% and -8.4% of GDP, respectively (Figure 1.4, Panel A). Over the period 2013 and 2023, many Caribbean countries experienced fiscal deficits, with Suriname, the Bahamas, and Guyana averaging overall deficits of -6.7%, -5.1%, and -4.2% of GDP, respectively (Figure 1.4, Panel B). Jamaica’s high primary balance over the period is noteworthy, with this consistent performance supported by important reforms to fiscal institutions.
Note: Data is from 2022 for Dominica and 2018 for Haiti due to data availability.
Source: Authors’ elaboration based on CEPALSTAT (ECLAC, 2023[9]).
High public debt levels remain a challenge in many Caribbean economies
Public debt levels grew significantly in most Caribbean economies in the last decade, but heterogeneity exists across countries. In 2022, the central government’s total public debt remained high, averaging 78.8% of GDP. This was well above the average for Latin America (52.9%). It was also higher than central government public debt ten years before: in 2012, this stood at 69.2% (Figure 1.5).
Substantial heterogeneity is evident across countries, both in the level of public debt and in recent trends. In 2022, Barbados and Suriname showed public debt levels higher than 100% of GDP. However, Suriname’s public debt fell to 93% in 2023 following debt restructuring agreements. Similarly, Barbados’ debt fell to 116.5% in 2023, in line with pre-pandemic levels, following its 2018–19 sovereign debt restructuring and fiscal consolidation under the Economic Recovery and Transformation Plan, which includes a commitment to bring debt down to 60% of GDP for the financial year 2035/36 (IMF, 2024[10]; IMF, 2024[11]). On the other hand, Trinidad and Tobago, and Saint Kitts and Nevis have figures below 60%. While public debt levels have risen in most countries since 2012, Jamaica, Belize, Grenada and Saint Kitts and Nevis managed to reduce public debt in this period. Jamaica is a notable case of debt reduction through the adoption of well-designed fiscal rules and a partnership agreement with the government, the private sector and civil society that ensures an equitable distribution of adjustment burdens (Arslanalp, Eichengreen and Blair, 2024[12]).
Source: Authors’ elaboration based on CEPALSTATS (ECLAC, 2023[9]).
Exposure to international price levels underscores the importance of sound monetary policy
After a spike in 2022, inflation is converging towards lower levels for some countries in the region. Food and energy prices drove higher inflation, which impacted the overall economy and then decreased in 2023 (Galindo and Izquierdo, 2024[13]). Caribbean economies, which are generally small, low diversified and highly dependent on imports, are particularly vulnerable to inflation driven by the pass-through of international prices.
The different monetary and exchange rate regimes in the region partly explain the different ability to tame inflation after the food and energy price shock. Countries with fixed exchange rate regimes, which peg their currencies to the US dollar, have exhibited the lowest inflation rates, averaging around 2% between 2012‑23 (Figure 1.6). This stability is due to the outsourcing of monetary policy to the United States, which provides an external anchor but limits countries’ flexibility to respond to shocks. Countries with inflation-targeting regimes, which allow central banks to adjust interest rates for price stability, experienced slightly higher inflation, averaging about 4% in the same period. Central bank independence and inflation targeting are associated with lower inflation and anchored inflation expectations (Beuermann et al., 2021[14]). Intermediate regimes, which use a combination of policies, show the highest volatility, with inflation reaching 33.4% in 2023. Suriname mainly drives this group's figures due to currency depreciation, government fiscal consolidation measures and external macroeconomic shocks (ECLAC, 2024[15]), while Haiti faces profound social and political instability.
Note: Inflation-targeting regimes: the Dominican Republic and Jamaica. Intermediate: Haiti, Trinidad and Tobago, and Suriname. Fixed: Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines.
Source: Authors’ elaboration based on WEO database (IMF, 2024[1]).
Strengthening investment and connecting it to development goals is fundamental to drive inclusive and sustainable growth
Investment levels have shown an increasing trend in recent years. Between 2015 and 2023, average investment in the Caribbean increased from around 23% to almost 27% of GDP, compared to averages ranging from 20% to 22% in Latin America and from 23% to 24% in OECD countries in the same period (Figure 1.7). Investment is crucial for driving economic growth and development as it increases productive capacity, fosters job creation, enhances productivity, and has a positive multiplier effect throughout the economy. In small economies like those in the Caribbean, large investments can have an outsized impact due to their relative size. Significant investments in sectors such as tourism or natural resources can influence overall investment levels, rendering them particularly sensitive to large-scale projects.
Investment levels vary considerably within the region. In 2023, they ranged from more than 40% of GDP in Suriname and Grenada to less than 20% in Barbados, Guyana and Haiti (Figure 1.7). In Suriname, investment is primarily driven by the exploration of offshore oil and gas reserves (IMF, 2024[16]). In Grenada, the Disaster Resiliency Strategy, which focuses on building resilient infrastructure, and the Citizenship-by-Investment (CBI) program, which supported public and private investments, mainly in real estate, played a key role (IMF, 2023[17]). The private sector is the main driver of investment in the region. In Antigua and Barbuda, the Bahamas and the Dominican Republic, private investment represented more than 89% of total investment in 2019 (OECD et al., 2023[18]).
Source: Authors’ elaboration based on IMF (2024[1]).
Public investment in infrastructure for some countries in the region remains low. Between 2015 and 2021, average public investment in infrastructure in Belize, the Dominican Republic, Guyana and Trinidad and Tobago was 1.3% of GDP, below the Latin American average of 1.9%. Belize invested 4.7% of its GDP in water, energy, telecommunications, and transport sectors, Guyana, Trinidad and Tobago, and the Dominican Republic invested around 1% of their GDP, focusing mainly on transport and water. (Figure 1.8).
Quality public infrastructure is crucial for sustainable and inclusive development as it can attract private investment and promote growth and connectivity (OECD et al., 2023[18]). Investing in resilient infrastructure is essential for integrating national and international markets and adapting to climate change impacts. However, Caribbean countries face significant challenges in developing infrastructure. As small states, they struggle to achieve economies of scale and have limited access to concessional financing and global capital markets. Additionally, high public debt burdens, frequent natural disasters and exposure to climate change create uncertainties and necessitate innovative and resilient infrastructure solutions (Queyranne, Daal and Funke, 2019[19]).
Source: Authors’ elaboration based on Infralatam (2021[20]).
The region has attracted foreign direct investment (FDI), mainly towards the energy and services sectors. Between 2013 and 2021, FDI net inflows as a percentage of GDP were on average above 6%; in 2022 they represented 4.18%, similar to the level in 2023 of 4.3% (excluding Guyana, which saw an extraordinary increase of FDI in 2023, reaching 42.8%). FDI flows to the Caribbean in 2023 were higher than in Latin America (2.7%) and the OECD (0.1%) (Figure 1.9).
FDI inflows show varied trends across different economies. Guyana has experienced a significant surge in FDI, primarily driven by investments associated with oil discoveries. The Bahamas and Jamaica attract FDI mainly in financial services and tourism. Meanwhile, flows to the Dominican Republic are channelled to tourism, natural resources and building capacity to generate renewable energy. Conversely, Trinidad and Tobago has seen a decline due to a slowdown in the energy sector caused by the maintenance of facilities and the shutdown of some petrochemical plants (UNCTAD, 2022[21]; ECLAC, 2023[22]; ECLAC, 2022[23]).
Source: Authors’ elaboration based on World Bank (2023[3]).
Caribbean countries are mostly service-based and commodity-exporting economies
In 2022, services accounted for 55-78% of total GDP for most countries, with tourism as the main economic activity for many of them (Figure 1.10). Tourism supports hospitality and entertainment industries and creates backward linkages with agriculture, trade, transportation and construction. Between 2015 and 2019, tourism accounted on average for 25.4% of Caribbean countries GDP (Gomez Garcia et al., 2021[24]). Nevertheless, tourism depends highly on external conditions. It is seasonal and also vulnerable to climate shocks (Acevedo, LaFramboise and Wong, 2017[7]; CDB, 2017[25]). For instance, 46% of tourists come from the United States and 20% from Europe. This makes the region highly susceptible to external shocks, as evidenced by the impact of the 2008 financial crisis and the COVID-19 pandemic. It is equally vulnerable to natural disasters such as hurricanes, which have destroyed buildings, roads and infrastructure in the past (Mooney et al., 2021[26]). In addition to tourism, financial services play an important role, accounting for between 8% and 27% of GDP for countries in the region, with the highest shares observed in the Bahamas (27%), Barbados (26%), and Saint Lucia (21%) (ECLAC, 2023[9]).
Note: Calculations based on GDP at constant 2018 USD prices. “Other” includes taxes on products minus subsidies on products and statistical discrepancy of GDP by sector of origin.
Source: Authors’ elaboration based on CEPALSTAT (ECLAC, 2023[9]).
Tourism in the Caribbean has experienced significant growth. Between 1995 and 2018, tourist arrivals in the Caribbean increased from 10 million to 27 million per year. However, the COVID-19 pandemic caused a significant drop in 2020 and 2021. In 2022, tourist arrivals rebounded to 22 million, although they remained below pre-pandemic levels (Figure 1.11, Panel A). The primary recipients of tourists are the Bahamas, the Dominican Republic, Jamaica and Barbados, which collectively account for 75% of arrivals during this period. Tourism expenditure contributes significantly to the regional economy, reaching 32% of GDP in 2022 (Figure 1.11, Panel B).
Note: Panel A. “Other” includes Antigua and Barbuda, Belize, Dominica, Grenada, Haiti, Saint Lucia, and Saint Vincent and the Grenadines.
Source: Authors’ elaboration based on ECLAC (2023[9]) and UNWTO (2024[27]).
Natural resources also play a significant role in Caribbean economies. Guyana's oil and gas exploration and production sector contributed to the country’s 62% real GDP growth in 2022. Since 2019, oil production has been the country's primary driver of economic growth (IMF, 2023[28]). The economy of Trinidad and Tobago is also driven by oil and gas production and the associated petrochemical sector, while Suriname relies on mining and has a large potential to develop the oil and gas industry following the successful recent exploration of offshore reserves. Agriculture remains important for countries like Belize, Guyana and Dominica. Historically focused on sugar and banana exports, the sector now faces slow productivity growth due to high trade costs and limited capacity to meet modern food safety standards. This has led to a higher reliance on imports to meet the growing demand from tourism, processing and retail industries. Challenges within the sector include inadequate technology, low credit availability, high labour costs and insufficient infrastructure (FAO, 2019[29]).
Countries in the region face current account deficits associated with their external dependencies
Most Caribbean countries experience current account deficits as limited domestic production results in significant import dependence. Between 2012 and 2022, Dominica, and Saint Vincent and the Grenadines, exhibited average deficits accounting for 23% and 17% of GDP, respectively. In Dominica, the current account deficit has been narrowing since 2019 but widened to 33.7% of GDP in 2023, as higher imports for the construction of strategic infrastructure projects outweighed higher tourism receipts (IMF, 2024[30]). In Saint Vincent and the Grenadines, current account deficits have narrowed representing 5.4% of GDP in 2023 – and are expected to fall over the medium term, supported by lower fossil fuel imports (IMF, 2024[31]). For its part, Trinidad and Tobago held a surplus of 8% (Figure 1.12). In 2022, Saint Lucia, Dominica, the Bahamas and Grenada saw improvements in their current account balances thanks to tourism recovery after the COVID-19 pandemic (ECLAC, 2022[32]).
Oil exports and rising prices boosted the balances of Trinidad and Tobago, Guyana, Jamaica and the Bahamas. Meanwhile, Grenada, Saint Lucia, Dominica, and Antigua and Barbuda increased exports in agricultural products, prepared foods, beverages and tobacco (ECLAC, 2023[33]).
Source: Authors’ elaboration based on World Bank (2023[3]).
The export basket reflects low value added and limited diversification
Caribbean economies rely significantly on international trade. Given their small size, they depend on imports to meet internal demand and support manufacturing and services like tourism. At the same time, they export a limited range of services and commodities. Services constitute the primary component of the export basket for many Caribbean countries. This sector accounts for 60% of total exports in Belize and up to 97% in Antigua and Barbuda. It is driven by tourism and financial, computer and information services (Giordano and Ortiz de Mendívil, 2021[34]) (Figure 1.13)
Source: Authors’ elaboration based on UNCTADstat (2022[35]).
In terms of trade in goods, the region is a net importer. Exports are concentrated in primary products and resource-based manufactures, such as crude and refined petroleum, alcoholic beverages, cereals, food preparations, chemical elements, minerals and tobacco. These accounted for 57% of total goods exports in 2022 (Figure 1.14). Imports are dominated by resource-based manufactures (29%) and medium technology manufactures (27%), including processed food, automotive vehicles, and machinery and equipment for various industries (UNCTAD, 2022[35]; ECLAC, 2023[33]).
Note: Values are USD million in current prices.
Source: Authors’ elaboration based on UNCTADstat (2022[35]).
Caribbean economies engage with various trade partners to enhance market access and co‑operation. Many islands are members of trade blocs like the Caribbean Community (CARICOM) and the Organisation of Eastern Caribbean States (OECS), which help facilitate trade integration (see Chapter 6). Country members from these blocs also participate in Economic Partnership Agreements (EPA) with the European Union and the United Kingdom through the CARIFORUM-EU and CARIFORUM-UK EPA. These agreements remove all tariffs and export quotas and cover various trade issues, including services, intellectual property rights and public procurement. They aim to promote sustainable development and regional integration (Grieger, 2023[36]).
Additionally, the Caribbean Basin Initiative, a programme by the United States, promotes economic development and export diversification in the region by allowing duty-free and quota-free treatment for goods (USTR, 2023[37]). In 2022, CARICOM's main export destinations were Europe (35%, mainly the Netherlands, Germany, Italy and the United Kingdom), the United States (27%), and Latin America (20%). Imports primarily came from the United States (45%), the People’s Republic of China (10%) and Europe (16%, mainly from Italy, the Netherlands, Germany and the United Kingdom) (OEC, 2022[38]).
Deeper economic integration, trade diversification and upgrading are vital strategies to support economic dynamism in Caribbean economies (see Chapter 6). Caribbean countries need to diversify their trade partners, manage complex trade networks, strengthen regional ties, and brand themselves as quality trade and manufacturing partners to harness their productive potential (OECD/UNCTAD/ECLAC, 2020[39]). Strengthening the potential of current lead sectors will also be important. For instance, by expanding services provided to tourists and increasing linkages of tourism to domestic producers or by engaging in more processing and transformation of existing raw material exports.
Firms in the Caribbean show low levels of internationalisation and innovation, partly as a result of persistent barriers to doing business
Levels of internationalisation of Caribbean firms seem to be limited, as firms tend to operate mainly in local and national markets. In 2021, across the 13 Caribbean countries covered in the 2021 Compete Caribbean Innovation, Firm Performance and Gender Survey, around one firm out of five (19.6%) reported that the primary market of its products and/or services was international. Most firms’ primary market was local (38.9%) or national (41.5%). The situation varies little across countries, with a few exceptions: firms appear to be more internationally connected in Grenada (22.7%), Antigua and Barbuda (24.7%) and Belize (58.7%).
In terms of principal clients and the extent of positioning in value chains, four Caribbean firms out of ten reported that other firms bought their product or services, with the distribution by client size being equal among small (13.6%), medium (11.6%) and large firms (15.2%). Establishments in Suriname, the Bahamas, Dominica and Grenada appear more connected in production value chains. Firms that operate directly for the final consumer represent another 40% of the total, with Barbados (47.3%), Guyana (55.8%) and Belize (69%) well above the regional average.
Across the region, most establishments compete with informal firms (56.8% of the total), with particularly high levels in Belize (73.6%), Guyana and Grenada (66%), or with firms that do not register receipts or formal records (48.2%).
Regarding innovation, only 10% of firms reported introducing at least one innovation in the major areas of their operations in the three years preceding the survey (2018-21) (Figure 1.15). Among those firms, most innovations were linked to marketing, packaging, and pricing of products and services (16.5% of establishments), new or improved goods (15.8%) and new methods for producing goods or providing services (15.1%). Conversely, less than 8% of Caribbean firms introduced innovations in business organisational practices, work responsibility, decision-making and human resources, accounting and other administrative operations, or information processing and communication. Establishments operating in services appear generally more innovative than those in manufacturing.
Areas of innovation across establishments having introduced innovations in the past three years (2018-21)
Note: The data refer to the unweighted average of the following countries: Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, and Trinidad and Tobago.
Source: Authors' elaborations based on the Compete Caribbean Innovation, Firm Performance and Gender Survey, 2021.
Among the firms that introduced at least one innovation in the reported areas, most (52.7%) affirmed that the innovation process was critical or important for accessing new markets. A smaller percentage (43.3%) affirmed it increased production capacity or improved the quality of their products or services (33.4%). Only a few firms reported innovating to reduce unit production costs (26.4%), improving working conditions (18.5%) or improving supervision in the production processes (15.9%). In most cases, firms reported having financed innovations with capital of private shareholders and other stakeholders (55% of total establishments) or bank loans (30.5%). Meanwhile, public funding was reported to fund innovations in only 3.1% of firms.
Innovations are particularly important for achieving environmental and biodiversity goals and reducing pollution and the economy's carbon footprint (see Chapter 3). In the Caribbean, less than one establishment out of five has introduced innovations leading to environmental improvements. Green innovations were more likely to be introduced in areas such as recycling waste, water or materials and reducing energy or material use per output unit. They were less likely for broader green policies such as reducing overall carbon footprint or air, soil and air pollution (Figure 1.16).
Percentage of establishments that introduced innovations in the past three years
Note: The data refer to the unweighted average of the following countries: Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent, Suriname, and Trinidad and Tobago.
Source: Authors’ elaboration based on the Compete Caribbean Innovation, Firm Performance and Gender Survey, 2021.
Caribbean firms identified various obstacles to their business operations. The major obstacles to production operations in the region are access to finance (69.3% of firms report this as a major or severe obstacle), customs and trade operations (63.3%), an inadequately educated workforce (59.8%) and tax rates (52.7%). Fewer than three out of ten Caribbean firms indicate aspects like labour regulations, access to telecommunications networks, practices of informal competitors, the political environment, business licensing and permits as significant obstacles to doing business (Figure 1.17).
Percentage of establishments reporting the severity of each item affecting their operations
Note: The data refer to the unweighted average of the following countries: Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, and Trinidad and Tobago.
Source: Authors' elaborations based on Compete Caribbean’s Innovation, Firm Performance and Gender Survey, 2021.
This chapter has underscored the importance of strengthening macro-structural conditions in Caribbean countries, particularly as these are strongly exposed to changing global circumstances. While countries in the Caribbean are characterised by the diversity and heterogeneity across them, Box 1.1 includes some common challenges and overarching considerations that can guide national, regional and international policy action in the region in the medium-term.
Strengthening macroeconomic conditions and boosting potential growth
Implement a broad agenda to boost productivity in the region. Due to the multi-dimensional nature of productivity, this would involve putting in place a horizontal strategy encompassing actions to raise skills, accelerate innovation and invest in infrastructure, among others.
Maintain fiscal consolidation efforts, with a key role for sustainable fiscal frameworks and improved debt management strategies (see Chapter 5).
Underpin credible monetary regimes committed to anchoring inflation expectations and keeping inflation rates low.
Enable conditions for investment mobilisation, with an increased role for the public sector and for public-private partnerships (e.g. for key infrastructure), while attracting quality FDI with an impact on key dimensions of development.
Upgrading the production structure, together with deeper economic integration and an enabling environment for the internationalisation of firms
Strengthen the potential of current lead sectors in the region, for instance by expanding services provided to tourists and increasing linkages of tourism to domestic producers, or by engaging in more processing and transformation of existing raw material exports.
Manage large capital inflows associated to natural resource exploration and exploitation, so that these can have a trickle-down effect in the rest of the economy in terms of creation of jobs, environmental sustainability, and upgrading of the production structure.
Explore and invest in new opportunity sectors, especially those associated with rich biodiversity and natural endowments of Caribbean countries (see Chapter 3).
Consider possibilities for the diversification in terms of products or services and in terms of trade partners, strengthening regional ties within the Caribbean and with other Latin American countries (see Chapter 6).
Foster an environment where firms can innovate, expand, and better connect with global markets.
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