Strengthening both the quantity and quality of investment is essential to unlocking the Caribbean’s full development potential. The region continues to face modest potential growth, low productivity and high public debt alongside economic structures that remain heavily service-oriented and narrowly diversified. Combined with persistent social and environmental challenges, these factors underscore the need to mobilise greater – and better-targeted – resources to support more robust, inclusive and resilient development across the region. This chapter provides an overview of key development trends in the Caribbean, including macroeconomic conditions and social inclusion, as well as economic and environmental risks and opportunities. In addition, it examines the current state of investment in the region, identifying critical gaps and providing key policy messages.
Caribbean Development Dynamics 2026
Abstract
Macroeconomic conditions are characterised by modest potential growth, low productivity and high debt levels
Over the past decades, Caribbean countries have struggled to sustain high levels of potential gross domestic product (GDP) per capita growth, reaching an estimated 1.4% in 2025, on average (Figure 1.1). This is below the level observed in advanced economies, which on average recorded a potential GDP per capita growth of 1.8%. Meanwhile, Latin America registered an average of 1.1%, below the Caribbean average. Nonetheless, potential growth in Latin America has shown modest gradual improvement in recent years, while potential growth in the Caribbean has shown a decreasing trend.
The region experienced a strong economic recovery in 2021‑2023, returning to pre‑pandemic GDP levels within three years and entering 2024 with continued growth (IDB, 2024[1]). However, the slowdown in potential growth in the Caribbean in the last decades reveals longstanding structural weaknesses. These include low productivity gains, elevated public debt levels, high rates of labour informality and limited investment in innovation and infrastructure (Rosenblatt, 2023[2]; Ianchovichina, 2024[3]; Mooney et al., 2025[4]).
The region’s strong reliance on tourism and services presents an additional structural constraint. The tourism and services sectors are more susceptible to external shocks and typically generate lower productivity gains. This limits the potential for higher, long-term growth trajectories (OECD, 2025[5]).
As estimated by different methods since 1980
Note: Potential GDP per capita 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 region, over the period analysed. Caribbean countries considered are: Antigua and Barbuda, The Bahamas, Barbados, Dominica, Dominican Republic, Grenada, Haiti, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, and Trinidad and Tobago. 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 (1) was determined by analysing the autocorrelation function and choosing the model that maximised the log-likelihood.
Source: Authors’ calculations based on IMF (2025[6]), World Economic Outlook, https://www.imf.org/en/publications/weo/weo-database/2025/april.
Other factors have contributed to lower competitiveness and lower potential growth in Caribbean economies (Cont et al., 2025[7]). The loss of preferential access to European markets and the deterioration of terms of trade in the 1990s, for example, posed major disadvantages for agricultural exports (Acevedo, Cebotari and Turner-Jones, 2013[8]). The region also faces both an ageing population and fewer youth entering the labour market. A global economy constrained by the post‑2008 financial crisis also contributed to lowering growth in the 2010s (Cont et al., 2025[7]); the COVID‑19 pandemic further limited regional growth, triggering a significant increase in public debt levels. In addition, extreme weather events averaged 2.13% of GDP annually between 1980 and 2020, further constraining the region’s potential for growth (OECD/IDB, 2024[9]).
Low productivity is a persistent constraint on the Caribbean’s growth potential
Average labour productivity in the region during the last three decades remained at less than half of OECD levels (42.5%), above the Latin American average (36.4%) (Figure 1.2). The region’s performance varied widely compared to the OECD level. Productivity in Haiti – the least productive country (“min” in Figure 1.2) throughout the analysed period – fell from 14% of OECD levels in the 1990s to around 7% in 2023. The most productive country performance (“max” in Figure 1.2) has alternated among three countries. The Bahamas recorded the highest values from 1991 to 2007 and in 2009, representing from 99% to around 70% of OECD productivity in that period, mainly due to financial services and tourism. Trinidad and Tobago followed, leading in 2008 and from 2010 to 2020 with 62‑75%, a performance driven by both energy and non-energy activities, such as food processing (Central Bank of Trinidad and Tobago, 2020[10]). Since 2021, driven by a boom in the oil sector, Guyana has led productivity in the Caribbean, doubling the maximum level from 69% to 137% in a region still showing relatively low productivity levels (World Bank, 2023[11]). Accurately measuring productivity in the Caribbean is complex as aggregate figures can be disproportionately skewed by volatile sectors, such as commodities (OECD/IDB, 2024[9]). In addition, standard metrics often fail to account for external shocks like natural disasters or fluctuating global prices (Rosenblatt, 2023[2]).
Stagnant productivity in the Caribbean is driven by a combination of key structural factors, with size and inadequate infrastructure at the heart of the challenge. The small size of these nations hinders economies of scale, which limits the diversification of markets and constrains local production (OECD/IDB, 2024[9]). Effective infrastructure in transport, energy and digital connectivity is fundamental to economic efficiency. It reduces operational costs for businesses, optimises production processes and fosters knowledge spillovers that drive innovation and market access (Clarke, 2025[12]). However, a history of persistent low investment in regional infrastructure has resulted in infrastructure systems that are often inefficient, hindering gains in productivity (Mooney et al., 2025[4]). As in other developing countries, this situation is reinforced by limited access to finance for productive activities and a high level of labour market informality, both of which discourage investment in skills and technology (ECLAC, 2024[13]; OECD/IDB, 2024[9]). This undermines the foundational drivers of economic growth, such as human capital development, technology adoption and efficient capital allocation, leading to a long-term decline in productive capacity.
Note: Productivity is measured by GDP per person employed (constant 2021 PPP USD). Max=maximum value among Caribbean countries per year. Min=minimum value among Caribbean countries per year.
Source: Authors’ elaboration based on World Bank (2023[11]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators.
High public debt levels remain a challenge in many Caribbean economies, constraining fiscal space
The limited fiscal space in the Caribbean is directly related to elevated public debt levels. In 2024, central government debt averaged 68.6% of GDP – up from 64.7% in 2014 (Figure 1.3). Public debt stood at 14.5 percentage points above the average in Latin America in 2024, at 54.1%. The lowest debt‑to‑GDP ratios were observed in the Dominican Republic (35.3%), Guyana (24.3%) and Haiti (14.9%).
The debt landscape across the Caribbean is marked by significant heterogeneity. The COVID-19 pandemic sharply increased debt ratios across most Caribbean economies. Between 2012 and 2019, the region’s average debt‑to‑GDP ratio stood at around 68%. Before the pandemic, The Bahamas, Guyana and Saint Lucia maintained ratios below 70%, while Jamaica, Barbados and Grenada exceeded 100%. The regional average surged from 69% in 2019 to 96% in 2020, reflecting the severe fiscal impact of the crisis. Suriname and Trinidad and Tobago, for example, saw their public debt increase importantly between 2014 and 2024, Jamaica, Grenada, Barbados and Guyana achieved notable fiscal consolidation. The case of Jamaica is particularly instructive. Through persistent primary budget surpluses and co‑ordinated burden-sharing agreements with creditors, the country reduced its debt-to-GDP ratio from 140.3% to 69.9% in a single decade (Figure 1.3). In Grenada, debt reduction was supported by a combination of strong economic growth and robust primary surpluses (IMF, 2025[14]).
Note: The average for Latin America excludes Venezuela and Ecuador due to data availability constraints and considers the latest available data: 2023 for Colombia and 2022 for Peru.
Source: Authors’ elaboration based on IMF-WEO (2025[15]) World Economic Outlook Database, International Monetary Fund, https://www.imf.org/en/publications/weo/weo-database/2025/april.
Over the last decades, the accumulation of debt has created a high debt-low growth trap in the Caribbean. Public debt has been above 60% of GDP for a prolonged time in the Caribbean, representing serious fiscal constraints for public expenditure (Greenidge, 2012[16]). These high debt levels have increased debt service costs in the region, constraining the fiscal space for advancing essential public investments in development projects (Chapter 3) (ECLAC, 2024[13]). Furthermore, high debt has constrained growth by crowding out private investment, keeping borrowing costs elevated and reducing fiscal flexibility (Mooney, 2021[17]). Most Caribbean economies, due to their middle-income status, have not benefited from international debt relief and face higher borrowing costs in international financial markets (OECD, 2023[18]).
These combined pressures have hindered economic growth. In the Caribbean context, evidence shows that once debt exceeds 30% of GDP, the positive effects on growth tend to diminish rapidly. Beyond the 55% threshold, debt acts as a drag on economic activity (Greenidge, 2012[16]). These dynamics contribute to a prolonged stagnation in economic output, making the path to sustainable development more challenging. Escaping this high-debt trap requires a comprehensive strategy that prioritises growth-enhancing reforms and fiscal consolidation, as well as insuring against natural disasters (Chapter 3).
Trade patterns reveal a divide between service-oriented and merchandise-exporting economies, and an overall reliance on merchandise imports
Trade composition in the Caribbean is primarily characterised by services exports and merchandise imports, with significant heterogeneity across countries. Most Caribbean countries are predominantly service exporters. In 2023 services exports accounted for 63% of total exports, on average (UNCTAD, 2025[19]). In the same year, services exports surpassed 50% of GDP in Antigua and Barbuda, Grenada, Saint Lucia, and Saint Kitts and Nevis, largely due to tourism and financial services (Figure 1.4, Panel A). In contrast, Trinidad and Tobago, Guyana and Suriname are typically merchandise exporters. In 2023, such goods represented over 80% of their total exports, while services accounted for only 5-15%. For Guyana and Suriname, merchandise exports, substantially driven by oil and gold, respectively, reached over 65% of their GDP that year. Haiti also exports mostly merchandise (about 65%, against 35% of services), although its total exports represent less than 10% of its GDP.
Note: The figures show services and merchandise exports (Panel A) and imports (Panel B), expressed as a percentage of GDP for Caribbean countries. In Panel B, the Caribbean average does not include Belize due to data unavailability.
Source: Authors’ calculation based on WTO (2025[20]), WTO Stats, https://stats.wto.org/.
On the import side, the Caribbean reflects a strong reliance on foreign merchandise. Merchandise imports account for 36.6% of GDP, compared to 23% of GDP for services, a pattern relatively consistent across economies (Figure 1.4, Panel B). Except for Saint Kitts and Nevis, where service imports constituted 47% of GDP compared to 31.5% for merchandise, all other economies imported more goods than services. This substantial share of merchandise imports is partly structural, arising from the small size of these countries. These factors limit economies of scale and the development of diversified domestic markets, thereby constraining local production capacity. Furthermore, the focus on service-oriented economies often limits development of other sectors, such as manufacturing. Limited natural resources and geographic constraints further inhibit establishment of large-scale industrial production to meet local demand (OECD/IDB, 2024[9]).
The limited diversification of export baskets reflects the region’s production structure and highlights several underlying constraints that hinder its potential growth
Exports of goods in the Caribbean remain concentrated in primary products (38.7%) and resource-based manufactures (20.6%) which collectively accounted for nearly 60% of the region's total goods exports in 2023 (Figure 1.5). The dominant export categories are energy products, notably crude and refined petroleum. Agricultural goods, such as cereals, tobacco products, fish and processed foods (OECD/IDB, 2024[9]), tend to be directed towards other Caribbean countries. This aggregate figure, however, masks significant heterogeneity across the region. Most of the region’s merchandise exporters are commodity exporters. Guyana, for example, has become predominantly an oil exporter (accounting for 84.5% of its exports in 2023 (IMF, 2025[21]). For its part, Suriname also exports petroleum, while Trinidad and Tobago export primarily oil and natural gas products and Jamaica exports bauxite. Haiti remains an outlier with its high concentration in low-technology manufactures, particularly textiles (over 85% of exports).
Resource-based manufactures, such as processed foods, chemicals and basic metal products, represent an important share of goods exports in Barbados (44%), Saint Lucia (50%), Belize (61%) and Jamaica (77%) (Figure 1.5). However, a significant portion of resource-based manufactures are re-exports (goods of foreign origin that undergo no substantial transformation), including refined petroleum products from Jamaica and The Bahamas (Statistical Institute of Jamaica, 2025[22]).
Similarly, medium-technology manufactures often include goods that are imported and then re-exported rather than being produced domestically. Re-exports constitute 17% of goods exports in the Caribbean, on average, and over 40% in countries like Saint Vincent and the Grenadines, and Antigua and Barbuda (WITS, 2025[23]). They also account for 84% of total exports in Antigua and Barbuda, 77% in The Bahamas, and 49% in Barbados (UN Comtrade, 2025[24]). Therefore, the high share of manufactured exports in certain economies often reflects regional shipping and refining services rather than large-scale domestic industrial activity.
Source: Authors’ elaboration based on UNCTAD (2025[19]), International Trade, https://unctadstat.unctad.org/datacentre/.
Caribbean services trade are largely focused on tourism in most countries
Services trade in Caribbean countries averaged 45.7% of GDP in 2024 (Figure 1.6, Panel A). Travel is by far the largest services trade sector in the Caribbean, making up 72% of the region’s total services trade in 2023 (Figure 1.6, Panel B). In the same year, travel services exports represented 71% of total services exports in the Caribbean, underscoring the sector’s central role in the region (UNCTAD, 2025[19]). The industry has grown substantially over the past three decades, with annual tourist arrivals rising from 10 million in 1995 to 34.2 million in 2024 (CTO, 2025[25]). In 2022 alone, tourism spending accounted for nearly one-third (32%) of the region's total economic output (OECD/IDB, 2024[9]). Some countries have developed other services exports, like transport in Trinidad and Tobago, financial services in The Bahamas and Barbados, and government services in Saint Kitts and Nevis. However, these services typically represent just 10-30% of their total services exports, leaving tourism as the dominant export sector across most Caribbean economies.
The dependence of the Caribbean on tourism highlights its limited economic diversification (Figure 1.6, Panel B) and vulnerability. In 2018, the tourism sector alone contributed nearly USD 60 billion to the region, contributing 8% directly and 25% indirectly to the Caribbean GDP (FAO, 2019[26]). However, the sector is vulnerable to various shocks, such as the impact of the COVID‑19 pandemic. More frequent climate-related weather events also disrupt tourism (Mooney and Rosenblatt, 2021[27]; CBB, 2024[28]).
As discussed in Chapter 2, strategic investments in resilient infrastructure, such as hurricane-resistant buildings and improved flood protection, could mitigate vulnerabilities. These measures would help stabilise the tourism sector during disruptions and enhance its long-term attractiveness through reliable services and sustainability commitments. Such measures will help complement, not replace, parallel investments in other activities, which are essential for economic diversification and capital attraction.
Like other developing regions, the Caribbean region could both add value to traditional sectors with remaining potential and strategically diversify into new, sophisticated sectors aligned with global demand (CBB, 2024[28]) (Chapter 2). The success of this transformation depends on fundamentally upgrading the technological and knowledge intensity of production with human capital and innovation (Cammeraat, Samek and Squicciarini, 2021[29]). Developing more sophisticated services sectors could help in this regard. These could include business process outsourcing, tourism and financial services, areas where Caribbean non-commodity exporters may have a comparative advantage. Foreign direct investment (FDI) can promote technology transfer and know-how by bringing in foreign expertise to facilitate “learning by doing” and improve technical and managerial skills within the local workforce (Sabha, 2020[30]; OECD, 2022[31]). In the Caribbean, many firms in the services sector, particularly in tourism and hospitality, which are already foreign-owned, provide in‑work training, although technology transfer is limited. There is also the problem of skilled workers leaving the country once they have been trained and staying abroad. Country efforts to incentivise skilled workers to stay and attract skilled emigrants back to their countries of origin are important in fostering a more skilled local workforce.
Note: Trade is the sum of exports and imports of services. Panel A shows the trade in services of Caribbean countries for 2024 as a percentage of GDP (World Bank, 2025). Panel B shows the services trade basket composition of Caribbean countries for 2023, with the colours respectively indicating: Tourism (blue), Transport (orange) and Other services (green). Other services include Construction, Insurance, Financial Services, Intellectual Property, Telecommunications, Other Businesses, Cultural Services and Government Goods and Services.
Source: Authors’ elaboration based on World Bank (2025[32]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators; UNCTAD (2025[19]), International Trade, https://unctadstat.unctad.org/datacentre/.
Caribbean exports are concentrated in a few major partners, although destination patterns vary significantly across countries
Caribbean exports remain highly concentrated among a limited number of trading partners, albeit with notable cross-country heterogeneity in export destinations and trade patterns. Due to its size and proximity, the United States serves as the region’s primary market, absorbing 62% of exports from Jamaica, 58% from the Dominican Republic and 55% from Saint Kitts and Nevis in 2022 (Figure 1.7). Intra-Caribbean trade plays an equally significant role for smaller states, accounting for 40‑45% of exports in Saint Lucia, and Saint Vincent and the Grenadines. Meanwhile, European markets represent major export destinations for some countries, such as Belize (40%) and Jamaica (18%). Latin America serves as a secondary but strategically important market. It accounts for 7% of regional exports on average and provides valuable diversification opportunities, particularly for Belize (21%), Trinidad and Tobago (14%), Saint Lucia (9%) and Barbados (9%). Finally, the United Arab Emirates is a key partner for Antigua and Barbuda (52%), Suriname (7%) and Guyana (7%), accounting for approximately 5% of regional exports on average. Overall, these patterns reveal how Caribbean nations maintain concentrated trade relationships with one or two dominant partners, but simultaneously develop unique trade connections shaped by history, locality and export profiles. Nonetheless, there have been initiatives to diversify export partners, particularly with Latin America.
Note: Overseas territories not included in EU total. Most recent year available for the following countries: Saint Lucia (2020) and Saint Kitts and Nevis (2017).
Source: Authors’ elaboration based on WITS (2024[33]), World Export Partner Share, https://wits.worldbank.org/CountryProfile/en/Country/WLD/Year/2021/TradeFlow/Export.
Caribbean economies are embedded in a network of trade agreements, designed to secure foreign market access, attract investment and foster economic diversification. This framework is anchored by regional integration arrangements, notably the Caribbean Community (CARICOM) and the Organisation of Eastern Caribbean States (OECS), which aim to deepen economic ties and create a more unified internal market (OECD/IDB, 2024[9]). Furthermore, to leverage external opportunities, the region has secured preferential access to major global markets through the CARIFORUM Economic Partnership Agreements with the European Union (EU) and the United Kingdom. These agreements aim to foster sustainable development and cover not only goods but also services, investment and intellectual property (European Commission, 2025[34]). However, intra-regional trade growth is also limited by the low scale of demand and high unit cost of shipping, given that many of these countries have populations in the few thousands. This contrasts with its main trading partner, the United States, where the main Caribbean hub (Miami-Fort Lauderdale-West Palm Beach Metropolitan Area, population 6.5 million) has more residents than the English-speaking Caribbean.
Poverty and inequality remain high, although significant heterogeneity persists across Caribbean countries
Poverty remains a persistent challenge in the Caribbean. One-quarter of the Caribbean population lives in households below the poverty line, on average, according to the latest data available (Figure 1.8). Poverty levels across Caribbean countries vary widely. In countries such as Haiti and Belize, over half the population live in monetary poverty. Conversely, in Jamaica and The Bahamas, the poverty rate reached 8.2% and 12.5%, respectively.
Poverty headcounts, percentages of total population
Note: The average for the Caribbean refers to the simple mean of the latest available years of reference for the whole sample of countries. The recent average for the region refers to simple mean for the sub-sample of countries with years of reference dating not earlier than 2016. The previous period is 2010 for Barbados, 2014 for the Dominican Republic, 2008 for Grenada, 2010 for Jamaica and 2006 for Saint Lucia. People living in poverty are defined as those living in households with income (or consumption) levels below the national poverty lines. National poverty lines are defined using country-specific methodologies. They represent the minimum amount of income or, more commonly, consumption expenditure an individual or household requires to satisfy their basic needs for a given period (usually a month) within a specific country. It is calculated using the Cost of Basic Needs approach, which explicitly incorporates both food and non-food expenditures. The national poverty lines are generally positively correlated with the level of development, as the basic needs change with the average income of countries, mostly due to larger non-food expenditures. Comparing national rates in the context of highly heterogeneous stages of development, as in the Caribbean, has the advantage of showing country-specific monetary vulnerabilities of households.
Source: Authors’ elaboration based on Statistical Institute of Belize (SIB) (2018[35]), Poverty Analysis Main Findings, https://sib.org.bz/wp-content/uploads/PovertyInfographic.pdf; ECLAC (2023[36]), Social Panorama of Latin America 2023, https://repositorio.cepal.org/server/api/core/bitstreams/7ddf434a-6073-4f1e-8b71-a6639e4586d5/content; World Bank (2025[32]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators; World Bank (2025[37]), Macro Poverty Outlook: Latin America and the Caribbean, https://www.worldbank.org/en/publication/macro-poverty-outlook/mpo_lac.
Due to data limitations, it is difficult to identify clear trends in the evolution of poverty over time, except for a few countries (World Bank, 2025[38]). In 2023, Jamaica achieved the lowest poverty rate in its history, driven by long-term macroeconomic stability, a robust social protection framework and targeted support during economic downturns (Clarke, 2025[12]). Other countries like the Dominican Republic also managed to reduce poverty rates by 2023. Belize started publishing a multi-dimensional poverty index (MPI) in 2021, capturing deprivations across various dimensions of well-being, such as health, education, employment, and living standards. The MPI shows advancements in different domains in recent years (World Bank, 2025[38]). Extreme poverty levels have generally increased in the Caribbean since 2015, particularly affecting female-headed households (ECLAC, 2023[39]).
The Republic of Haiti, the only lower middle-income economy in the Caribbean in 2023 (with all others classified as upper middle-income or high-income), stands out in terms of poverty levels (Metreau, Young and Eapen, 2024[40]). In 2025, an estimated 48.7% of Haitians lived on less than USD 3 per day (World Bank, 2025[37]). Haiti has faced a complex interplay of recurrent shocks over the past decade, including natural disasters and socio-political disruptions. These challenges have been compounded by persistent political instability, rising insecurity and a sharp escalation in humanitarian needs (ACAPS, 2025[41]). This situation is reflected in economic performance: in 2024, GDP contracted by 4.2% (World Bank, 2025[37]). Meanwhile, more than 1.3 million people have been displaced, with over 200 000 living in displacement camps across the country. The country continues to face deep structural challenges, including an underdeveloped financial market and a weak, uncompetitive labour market characterised by high informality and low quality, poorly remunerated jobs (World Bank, 2025[37]).
Across the Caribbean, the challenges of poverty and economic bottlenecks often interact with other major structural issues, such as food insecurity. On average, 33.9% of the region’s population live in moderate or severe food insecurity, a rate that surpasses the Latin American average of 29.3% (World Bank, 2025[32]). Within the region, however, there is significant heterogeneity. In 2024, while countries like Antigua and Barbuda (13.5%), The Bahamas (17.2%) and Grenada (17.3%) recorded lower rates, Belize (45.5%), Jamaica (56.4%) and Haiti (83.2%) exhibited higher values. A key driver of this insecurity is the high cost of food, which is about 42% higher than the OECD average (OECD/IDB, 2024[9]). This is largely due to a heavy dependency on food imports, which account for 80-90% of the regional food supply. Consequently, nearly 57% of the Caribbean population cannot afford a healthy diet.
Another interrelated concern is underdeveloped human capital, as illustrated by the case of Suriname, discussed below (Box 1.1).
In 2022, nearly one in five Surinamese lived in poverty, according to the World Bank’s upper middle-income threshold (USD 6.85 at 2017 purchasing power parity). This challenge is deeply linked to human capital deficiencies, where low educational attainment acts as both a cause and a consequence of economic hardship. National education expenditure is akin to that of other upper middle-income countries. However, key outcomes like the lower secondary completion rate lag behind and are comparable to those of significantly poorer nations.
These gaps in human capital create a critical skills shortage, consistently cited by enterprises as a major constraint on operations. This results in a pronounced labour market mismatch: an oversupply of workers with foundational skill deficits alongside an undersupply of those with technical and specialised competencies. This imbalance constrains business growth and hinders broader productivity gains in the economy.
The economic impact translates directly into stark disparities at the household level. Poverty rates exhibit a strong correlation with family size, rising precipitously from 5% for single-person households to 47.3% for those with 10 members. The most dramatic increase occurs between five- and six-person households, where the poverty rate more than doubles, jumping from approximately 13% to 28%. This pattern highlights the severe pressure on larger families and underscores the intergenerational nature of poverty as households with children are disproportionately affected.
Addressing these human capital gaps is therefore essential not only for raising living standards, but breaking this cycle of poverty and fostering inclusive long-term growth.
Source: Beuermann (2024[42]), The Suriname Poverty and Equity Assessment, https://publications.iadb.org/en/publications/english/viewer/Suriname-Poverty-and-Equity-Assessment.pdf.
Inequality is high across the Caribbean, mirroring trends in Latin America (OECD et al., 2025[43]; World Bank, 2025[38]), and exceeding levels observed in OECD Member countries. The average Gini coefficient for the Caribbean is 0.4, based on the latest available data since 2015 from seven countries (Belize, Barbados, the Dominican Republic, Grenada, Jamaica, Saint Lucia and Suriname). This indicates an inequality level higher than the OECD (0.32). However, it is slightly lower than the Latin American average (0.45), considering that a higher score denotes greater inequality (World Bank, 2025[44]). National estimates range from 0.48 in Antigua and Barbuda to 0.32 in Barbados (ECLAC, 2023[36]). However, limited country coverage in the Caribbean reveals a critical data gap stemming from the lack of household income or living conditions surveys. This impedes a full regional assessment and underscores the need for more robust social statistics (ECLAC, 2023[36]).
Apart from ongoing challenges, multi-dimensional socio-economic variables have improved. The Caribbean region exhibits a positive long-term trajectory in the Human Development Index. Between 1990 and 2023, the region moved from an average of 0.64 to 0.76 (with 1 representing the highest level of development), a similar trend to advances observed in Latin America. Despite this progress, important gaps remain if compared to the level of human development of, for example, OECD Member countries (0.9, on average, in 2022) (OECD/IDB, 2024[9]).
High levels of labour informality are intrinsically linked to poverty across the Caribbean
The high levels of inequality in the Caribbean can also be expressed in the significant disparity in informality rates between the poorest 20% and the wealthiest 20% of households, except for The Bahamas, according to the latest data available for six Caribbean countries (Figure 1.9). Informal employment is more than twice as prevalent among the poorest households compared to the wealthiest households in the region. This suggests that the presence of at least one formal worker in a household consistently contributes to improved living conditions for all members (OECD/IDB, 2024[9]). On average, nearly half of individuals in the lowest income quintile in the Caribbean (47.1%) live in households where all members work informally (72.3% in Latin America) compared to 23.6% in the highest quintile, according to latest data available. The remainder live in mixed households (23%), where at least one member works formally, and completely formal households (29.8%), where all members work formally (Figure 1.9).
Note: Household types are defined according to the formality status of a household’s principal earners. If all the earners are respectively formal or informal, the household is defined as completely formal or informal. If at least one earner is informal while the others are formal, the household is defined as mixed. The welfare distribution refers to the distribution of either household per capita income or consumption. The first quintile refers to the lowest income in the income distribution, while the fifth quintile refers to the highest income quintile in the income distribution.
Source: Authors’ calculations based on The Household Expenditure Survey (HES) 2013 for The Bahamas; the Trinidad and Tobago Survey of Living Conditions (TT-SLC) 2014; the Barbados Survey of Living Conditions (BSLC) 2016; the Jamaica Survey of Living Conditions (JSLC) 2019; the Suriname Survey of Living Conditions (SSLC) 2022; OECD (2024[45]), Key Indicators of Informality based on Individuals and their Households (KIIbIH) for the Dominican Republic.
Informality is a structural challenge in the Caribbean, intrinsically linked to poverty, inequality, weak labour market conditions and low GDP per capita potential growth (ECLAC, 2024[13]). The prevalence of informality is partially driven by a misalignment between labour costs and productivity observed in the Caribbean and in Latin America. For many firms, particularly small and medium-sized enterprises, the perceived costs of formal hiring are prohibitively high relative to the productivity of the available workforce (IDB, 2015[46]). This misalignment creates a strong incentive to remain informal. The situation is further exacerbated by high worker turnover and skills gaps linked to low-quality education, which discourages on-the-job training. The result is a self-reinforcing cycle, where low-productivity firms fuel rising informality, which reinforces the region’s overall stagnant labour productivity (Figure 1.2). This ultimately hinders innovation and long-term economic development (ECLAC, 2024[13]).
Unemployment rates have declined over the past decade, although employment levels remain low, with women, youth and older persons particularly affected
Employment in the Caribbean is lower than in Latin America, with persistent gender gaps. In 2024, 57% of the total population in the region was employed, below the Latin American average of 60% (Figure 1.10). Notably, female employment levels in the Caribbean (49%) are low compared to 65.3% of men employed. The low employability of women remains a persistent challenge in the region. Employment levels for men in the Caribbean, while significantly higher than for women, remain well below the average levels observed in Latin America.
Note: Percentage of the population aged 15 years and more in each group.
Source: Authors’ estimates based on data from World Bank (2025[32]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators.
Despite these structural challenges, the Caribbean region has made progress in reducing unemployment. The average unemployment rate in the Caribbean declined by 3 percentage points over the last decade, from 12.5% in 2014 to 9.5% in 2024 (Figure 1.11). Except for Haiti, and Trinidad and Tobago, all countries with available data registered a reduction in unemployment. In Jamaica, for instance, unemployment fell from historic highs averaging 15-20% in the late 20th century to a record low of 4.2% in 2023, a transformation driven by entrenched macroeconomic stability (Clarke, 2025[12]). Similarly, Saint Lucia achieved a substantial reduction of 10 percentage points between 2014 and 2024. This can be attributed to public initiatives supporting local entrepreneurs, particularly youth and micro, small and medium-sized enterprises (MSMEs) in the tourism sector. These initiatives complement targeted government policies, such as amnesties for value-added tax and other business incentives (Central Statistical Office of Saint Lucia, 2024[47]).
Source: Authors’ elaboration based on ILO (2025[48]), ILO Modelled Estimates Database, http://www.ilostat.ilo.org/data/bulk.
In addition to women, youth and older individuals face specific forms of vulnerability in the Caribbean labour market. Young people encounter severe barriers to entering the market, reflected in one of the world's highest rates of youth not in education, employment or training (NEET). This rate reached 31% in 2020 in the Caribbean – above the 20% average in Latin America (Figure 1.12). This challenge is particularly acute for young women, with 29.1% NEET compared to 22.3% for young men. This gender gap of 7 percentage points underscores the importance of youth employment policies that integrate gender-specific measures. In addition to increasing socio-economic vulnerability, high NEET rates potentially create opportunities for illegal activities that can be associated with higher crime rates. Citizen security is a major concern in a region with one of the highest murder rates in the world (23.7 per 100 000 people) and where youth, particularly men aged 15-29, are disproportionately involved in violent crime, both as victims and perpetrators (UNODC, 2025[49]).
In parallel to this challenge, older individuals face difficulties in exiting the labour market. Those aged 65 and over often remain active in the labour market beyond the typical retirement age. They are likely engaged in informal activities or self-employment due to pension income that is either inadequate or lacking altogether (ECLAC, 2023[50]). In 2018, for instance, 40% of men in this age group were still active in Jamaica and Belize, as were approximately 25% in The Bahamas, Saint Lucia, and Saint Vincent and the Grenadines (ECLAC, 2023[50]). In this context, developing stronger labour protections, continuous learning programmes and inclusive workplaces could enable the Caribbean to cultivate a silver economy, turning the challenge of an ageing population into an opportunity for sustainable development.
Note: As a percentage of the population aged 15-24, in each group.
Source: Authors’ elaboration based on ILO (2025[48]), ILO Modelled Estimates Database, http://www.ilostat.ilo.org/data/bulk.
Climate-related extreme weather events are increasingly frequent in the Caribbean, posing severe risks for its inhabitants and tourists
The Caribbean is increasingly exposed to climate hazards. Its geographical characteristics, extensive coastlines and proximity to the equator, heighten its vulnerability to sea-level rise, extreme flooding, tropical cyclones and intensified rainfall (Robinson and Wren, 2020[51]; OECD/IDB, 2024[9]). The region experienced 357 climate-related extreme weather events between 1980 and 2024, with the frequency of such events increasing by 84% in 2004‑2024, relative to the previous 20 years. In absolute terms, Haiti, the Dominican Republic and Jamaica were the most affected (Figure 1.13).
These events have had profound consequences in the region, affecting over 24 million people in the last four decades (OECD/IDB, 2024[9]). This reflects the Caribbean’s much higher vulnerability to climate change compared to most other regions. Such vulnerability forces fiscally constrained governments to divert scarce public resources from essential social and developmental projects to fund rebuilding. For example, the economic cost of Hurricane Ivan in 2004 in Grenada represented 148% of the country’s GDP (EM-DAT, 2025[52]) and damaged 90% of its physical infrastructure and housing stock, respectively (IMF, 2005[53]). Hurricane Melissa, which affected Haiti, Jamaica and Cuba in October 2025, had particularly devastating economic and social consequences in Jamaica (Box 1.2).
Note: Disasters are considered here as situations or events that overwhelm local capacity, necessitating a request for external assistance at the national or international level; an unforeseen and often sudden event that causes great damage, destruction and human suffering. The graph considers only climate-related events like droughts, floods, storms, extreme temperatures and wildfires. Geophysical events (earthquakes and volcanoes), technological events (industrial accidents) and biological events (from epidemics, insects or animals) are recorded in EM-DAT but excluded from the scores as they are not directly associated with climate change.
Source: Authors’ elaboration based on data from EM-DAT (2025[52]), EM-DAT Database, https://doc.emdat.be/.
Hurricane Melissa emerged as one of the most powerful storms ever recorded in the Atlantic. Classified as a high-end Category 5 hurricane with winds of 185 mph, it ranked as the second strongest storm by wind speed since records began in 1851, alongside four other hurricanes (Erdman, 2025[54]). The storm struck Jamaica with the greatest force in October 2025, but also inflicted severe damage in The Bahamas, Cuba, Haiti and the Dominican Republic.
The human cost of the hurricane was profound. Within two weeks, Jamaica reported 45 fatalities, while Haiti confirmed 43 casualties (as of 11 November 2025). The storm displaced hundreds of thousands of residents and tourists across the region. In Jamaica, over 30 000 households were damaged, forcing over 1 100 people into 88 emergency shelters. The scale of destruction was similar in Cuba, where more than 54 000 people were displaced, including 7 500 who found a bed in shelters, with 90 000 homes and over 600 health facilities damaged (IBRD/World Bank, 2025[55]).
The hurricane also inflicted an economic burden, damaging key infrastructure and affecting tourism activities, the region’s primary economic sector. It left more than 75% of Jamaica without electricity, paralysing daily life, businesses and public administration. This was compounded by the pre‑emptive closure of airports, hotels and businesses, which directly halted tourism. As a result, total economic damage was preliminarily estimated at USD 12.2 billion (56.7% of Jamaica’s GDP in 2024) (IBRD/World Bank, 2025[55]), surpassing that from Hurricane Gilbert in 1988. Gilbert, one of the strongest hurricanes recorded in Jamaica’s history, was a Category 4 storm that caused an estimated USD 4 billion in losses, affected 40% of agricultural fields and damaged over 100 000 homes (Jacobo, 2025[56]; IBRD/World Bank, 2025[55]; Jamaica Information System, 2026[57]).
Climate change effects can explain, in part, the storm’s unprecedented intensity and the magnitude of damages (Grantham Institute, 2025[58]) Estimates indicate that a warmer climate increased the hurricane's maximum wind speed by 7% and its rainfall by 16%, making an event of this severity about four times more likely today than in pre‑industrial times. This amplified physical force translated directly into greater loss, with models suggesting that climate change increased the economic damage by 34% (Grantham Institute, 2025[58]). This link underscores how a warming planet is exacerbating the economic vulnerability of the Caribbean (Grantham Institute, 2025[58]).
Climate vulnerability in the Caribbean remains high. The region’s average vulnerability level in 2023 was 0.426, nearly reaching the threshold for high vulnerability (0.45) (Figure 1.14). Furthermore, all Caribbean countries recorded levels above the OECD average (0.325), with a majority also exceeding the Latin American average (0.4).
High climate vulnerability exacerbates economic and social challenges in the Caribbean. The damages caused by extreme weather events impose severe economic burdens. For example, climate disasters in Dominica (2015) and Grenada (2004) resulted in losses equivalent to 225% and 200% of their respective GDPs (Ötker and Srinivasan, 2018[59]). Climate shocks also disproportionately affect key economic sectors, triggering job losses and deepening poverty and inequality. Tourism, the main service export for Caribbean nations, is particularly vulnerable to climate change effects. Disruptions to this sector have cascading effects across the Caribbean economy and society, given its central role in employment, income generation and foreign exchange (Fuller, 2020[60]).
Note: Vulnerability measures a country’s exposure, sensitivity and ability to adapt to the negative impact of climate change. ND-GAIN measures overall vulnerability by considering vulnerability in six life-supporting sectors – food, water, health, ecosystem service, human habitat and infrastructure. Scores above 0.45 are considered “highly vulnerable” by the UN CDP.
Source: Authors’ elaboration based on data from Notre Dame Adaptation Initiative (2025[61]), ND-Gain Country Index Data, https://gain.nd.edu/our-work/country-index/.
These vulnerabilities, combined with broader economic and social pressures, underscore the urgent need for investment in climate resilience and adaptation. According to the International Monetary Fund (IMF), the scale of such investment could exceed USD 100 billion, equivalent to roughly one-third of the Caribbean’s annual economic output (Guerson, Morsink and Muñoz, 2023[62]). The extraordinary scale of resources needed to build climate resilience in the region reinforces the urgency to attract both public and private investment to support this effort (Mooney et al., 2025[4]) (Chapter 3).
Caribbean contribution to global greenhouse gas emissions is among the lowest worldwide, with energy and industry remaining the dominant emitting sectors
Greenhouse gas (GHG) emissions in the Caribbean have increased slightly since 2013, but the region’s contribution to the global total remains marginal. In 2023, the average emissions level in the Caribbean (8.1 million tonnes of CO2 equivalent (Mt CO2e)) was 24 times lower than Latin America (195 Mt CO2e), 31 times lower than the world (234 Mt CO2e) and 45 times lower than the OECD (368 Mt CO2e) (Figure 1.15, Panel A). As in other regions, the energy sector is the primary source of emissions in the Caribbean (representing 37% of total GHGs). However, unlike other regional averages, the second largest emitting sector is industry (25%) instead of agriculture (15%).
Note: Regional averages are calculated as simple (unweighted) averages. Greenhouse gas (GHG) emissions are measured in million tonnes of CO2 equivalent (Mt CO2e). It includes emissions from fossil CO2, methane (CH4), nitrous oxide (N2O) and fluorinated gases (F-gases). The sectors shown are agriculture, energy (which includes buildings, fuel exploitation and power industry), industry (including industrial combustion and processes), transport and waste. Indirect emissions are not shown due to their minimal contribution at the aggregate level.
Source: Authors’ elaboration based on EDGAR (2025[63]), Emissions Database for Global Atmospheric Research, https://edgar.jrc.ec.europa.eu/.
Caribbean emissions remain minimal globally, even when accounting for differences in population, land area and GDP. This is notable given the region’s disproportionately high exposure and vulnerability to climate hazards, which exceed both Latin American and OECD averages (Figure 1.15). This disparity underscores the continued relevance of the principle of common but differentiated responsibilities in global climate action.
The energy transition, in this context, is a strategic priority for the Caribbean, in part for building systemic resilience. As one key reason, the region’s high climate exposure poses a constant threat to its power infrastructure; post-disaster blackouts often paralyse populations, businesses and public institutions for extended periods (Goldwyn, Tiah and Mowla, 2023[64]). This is related to the need for adaptation rather than mitigation. While the latter is still an honourable objective, creating resilient infrastructure is an existential mandate for the region, particularly islands and energy-importing economies. Consequently, investing in reliable, resilient and renewable energy systems will directly safeguard the region’s economic security and social well-being (OECD, 2024[65]) (Chapter 2).
The share of renewables in the Caribbean's electricity generation remains low and has been increasing at a modest pace
The transition to renewables in the Caribbean is advancing slowly, leaving the share of clean energy in electricity generation persistently low. In 2023, renewables accounted for an average of 16.3% of the region's electricity generation, which represents an increase of 1.16 percentage point from 2013 levels (15.2%). The regional average would be 19.9% when excluding countries where renewables account for less than 2% of electricity generation (The Bahamas, Grenada, and Trinidad and Tobago). In comparison, Latin America not only recorded a much higher share of renewables in 2023 (63.7%), but also an 9.4 percentage-point increase since 2013 (from 54.3%) (Figure 1.16). Belize has taken the lead, producing 77% of electricity from renewables in 2023, although one decade before this figure was above 90%. Suriname has increased the percentage of renewables by 9.2 percentage points in that period, reaching 61.1% in 2023 (Figure 1.16).
The low share of renewables is associated with structural economic vulnerabilities and the low capacity of many governments to implement and scale up projects quickly. In 2021, country members of the Caribbean Community (CARICOM) imported 87% of their oil, compared to a global average of 21% (Goldwyn, Tiah and Mowla, 2023[64]). The high import dependency and high costs of importing leave the region vulnerable to international price volatility, leading to elevated electricity costs. In 2019, the average electricity price in the Caribbean was USD 0.26 per kWh, exceeding rates in both the European Union (USD 0.21) and the United States (USD 0.18) (OECD/IDB, 2024[9]). These high costs have a cascading effect in the region: they diminish the competitiveness of key economic sectors like tourism, strain public budgets and divert scarce resources from critical development projects, including those essential for the energy transition and building resilient infrastructure (Mooney and Rosenblatt, 2021[27]).
Despite these challenges, the transition presents a major strategic opportunity to increase productivity, foster sustainable growth and reduce fiscal and climate vulnerabilities in the long term (Hallegatte, Rentschler and Rozenberg, 2019[66]; Mooney et al., 2025[4]). Estimates indicate that a USD 11 billion investment in the sector could generate up to USD 6.1 billion in economic benefits, reduce oil imports by 260 million barrels and save up to 41 million tonnes of CO2 emissions by 2040 (OECD/IDB, 2024[9]).
However, the energy transition also brings risks that must be managed to ensure a just process. These include addressing the threat of stranded assets in oil-producing countries and protecting workers in brown industries through retraining and compensation (EIB, 2021[67]; OECD, 2022[68]). A new utility business model is also essential to ensure electricity remains affordable for consumers, while being financially viable. For the transition to succeed, international partners have a key role in supporting energy security and citizen well-being, with strategies that consider the unique context of each Caribbean nation (OECD/IDB, 2024[9]).
Note: Proportion of renewable sources in the electricity generation matrix. The Bahamas, Grenada, Saint Lucia, and Trinidad and Tobago are not shown in the figure as their renewable electricity share remains equal or below 2%. Nonetheless, they are included in the Caribbean average. The Latin America average includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay, and Venezuela.
Source: Authors’ calculations based on IRENASTAT (2026[69]) International Renewable Energy Agency, database, https://www.irena.org/Data
High water stress and inefficient water use remain challenges in the Caribbean, although some countries are making notable progress towards more effective water management
The Caribbean faces significant challenges regarding water security, which are only partially mitigated by the region’s water use efficiency. In 2022, the average water stress level for the Caribbean stood at 20%, similar to the OECD average (Figure 1.17, Panel A). This remains below the benchmark of the Food and Agriculture Organization of the United Nations (FAO), indicating significant pressure (25%). However, it is 12 percentage points higher than the Latin American average (8%). Still, this disparity is proportionally offset by higher water use efficiency. At 33.25 USD/m³, efficiency in the Caribbean significantly exceeded that of Latin America (15.08 USD/m³) in 2022, helping to balance the regional disparity in water stress. However, it remained behind OECD Member economies (141 USD/m³) in that year (Figure 1.17, Panel B).
Note: Panel A shows the level of water stress, calculated as the proportion of total freshwater withdrawn to available renewable freshwater resources (%). Values above 25% indicate significant pressure on water resources. Panel B displays water use efficiency, expressed as the economic value added (in constant USD) generated per cubic meter of freshwater withdrawn. Higher values reflect more efficient use of water resource.
Source: Authors’ elaboration based on FAO (2025[70]), AQUASTAT – FAO's Global Information System on Water and Agriculture, https://www.fao.org/aquastat/en/.
This regional picture, however, masks the fact that some of the most water-stressed Caribbean nations, such as Barbados, and Trinidad and Tobago, are also among the most efficient users. For instance, in 2024, Barbados has conducted a debt-for-climate swap to upgrade the South Coast water and sewage treatment plant, enhance water quality and reduce marine pollution. The operation was supported by the IDB and the European Investment Bank (EIB) in partnership with the CIBC (Canadian Imperial Bank of Commerce) and the Green Climate Fund and will generate USD 125 million in fiscal savings (Chapter 3) (IDB, 2024[71]). Similarly, Trinidad and Tobago has bolstered its water resilience by adopting a unified national water policy and securing a USD 80 million IDB loan to upgrade its supply systems (IDB, 2022[72]). These cases highlight the importance of combining strong national policy with targeted international investments to address water security and management in the Caribbean.
Total investment in the Caribbean has grown in the last decade, but still fails to meet the required levels for development
Total investment levels in the Caribbean have experienced an upward trend over the past decade, yet they are insufficient to address the region’s development priorities. In 2023, total investment in the Caribbean averaged 28% of GDP (Figure 1.18, Panel A), exceeding the OECD average of 23% and 20.7% in Latin America. However, these cross-regional comparisons must be interpreted with caution. The Caribbean’s relatively small economies means that a few large-scale investment projects can represent a disproportionately high share of GDP. In practical terms, a single infrastructure project may account for several percentage points of GDP in a Caribbean country, something that would be negligible in larger economies. As such, headline investment-to-GDP ratios may overstate the region’s actual investment capacity and obscure the significant gaps that remain in meeting infrastructure and development needs.
The upward trajectory in investment, rising from 20.5% of GDP in 2014 to 28% in 2023, is a positive development, reflecting greater mobilisation of resources in several countries (Figure 1.18, Panel B). In contrast, the OECD saw only a modest increase over the same period (from 20% to 23%), while Latin America experienced a decline (from 23% to 20.7%). This divergence suggests that Caribbean countries have made efforts to prioritise capital formation. However, the scale and sustainability of this trend remain uncertain, given that investments have been largely driven by short-term or externally financed projects, sometimes linked to recovery efforts following natural disasters.
The Caribbean struggles to attract necessary long-term financing. Although the financial sector in the region is relatively large considering the size of its economy, local banks are often reluctant to lend money for long-term infrastructure projects, preferring shorter-term loans (EIB, 2024[73]). As well, international investors rate several countries in the region as high risk due to their economic volatility, high level of indebtedness and the small size of their economies, making them hesitant to invest (CBB, 2024[28]). Consequently, access to global capital markets in the Caribbean is limited.
Additionally, high levels of public debt in the region, above 68% in 2024 (Figure 1.3), constrain public budgets and leave little room for large-scale infrastructure projects (Queyranne, Daal and Funke, 2019[74]; ECLAC, 2024[13]). This situation has been exacerbated by a decline in access to concessional loans and grants. Many Caribbean nations are upper middle- or high-income countries, making them ineligible for international development aid or concessional debt relief (Mohan, 2022[75]). However, there is a recognition that small states are more vulnerable. Sometimes, they have been able to access some programmes: many bilateral development agencies work with Small Island Developing States (SIDS).
Note: Data for each region correspond to simple averages. Investment, defined as gross capital formation, is measured by the total value of gross fixed capital formation and changes in inventories and acquisitions less disposals of valuables for a unit or sector [SNA 1993]. Investment is expressed as a ratio of total investment in current local currency and GDP in local currency. The Caribbean includes 14 Caribbean countries, except for Trinidad and Tobago, and Latin America includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru and Uruguay.
Source: Authors’ elaboration based on IMF (2025[6]), World Economic Outlook, https://www.imf.org/en/Publications/WEO/weo-database/2024/April.
Beyond these financial hurdles, two structural challenges further discourage investment: small market size and high climate vulnerability. The small population of Caribbean countries means that infrastructure projects, which have high fixed costs, often cannot generate enough users or revenue to become financially viable (Queyranne, Daal and Funke, 2019[74]). Like other SIDS, Caribbean countries lack economies of scale. This makes many potential projects unattractive to public and private investors, and reinforces the volatility of Caribbean financial systems. This, in turn, makes the region vulnerable to global crises, such as the pandemic (Schmid et al., 2019[76]; CBB, 2024[28]). In addition, the Caribbean’s extreme exposure to natural disasters is often a significant deterrent for some private investment. The high frequency of climate hazards (Figure 1.13) often leads to substantial economic and infrastructure damage. This makes projects much riskier, raising insurance costs and creating uncertainty about long-term operations (CBB, 2024[28]). Consequently, private returns are not high and means that private investors are often unwilling to engage. Fiscally constrained governments are often the last resort in bearing the costs of building resilient infrastructure (Queyranne, Daal and Funke, 2019[74]).
Furthermore, significant gaps in technical capacity and data hinder investment. The limited availability of robust statistical systems and timely, comprehensive data constrain accurate assessment of financial risks. These data challenges are accompanied by a need to strengthen technical expertise, particularly in developing standardised metrics for measuring climate risks and improving awareness of green investment tools and opportunities. Such capacity gaps often hinder project development. Ultimately, these deficits in data and project preparation skills constrain private investments, reinforcing the region’s low growth and underscoring the need for substantial investments in innovation and appropriate technology (IFC, 2023[77]).
Government spending on infrastructure is low, reinforcing infrastructure gaps across the region
Public investment in infrastructure remains low across the Caribbean and limited data availability constrains a comprehensive regional assessment. Among the four countries with comparable data, heterogeneity exists in both investment levels and sectoral allocation. During 2015‑2021, Guyana, Trinidad and Tobago, and the Dominican Republic recorded average public infrastructure investment just above 1% of GDP. In Guyana, however, the situation has changed significantly since 2023 due to the recent oil boom and government focus on infrastructure investment. In contrast, Belize invested nearly 5% of GDP, the only country exceeding the Latin American average of 2% (Figure 1.19). Part of this reflects the use of special purpose vehicles of public enterprises – investments not typically recorded in the accounts of the general government. Sectoral priorities also varied considerably. Transport and water received significant allocations in most countries. However, apart from Trinidad and Tobago, Belize was the only country to direct substantial investment towards telecommunications, an area where it lagged other Caribbean countries.
Source: Authors' elaboration based on Infralatam (2021[78]), Data on Public Investment in Economic Infrastructure in Latin America and the Caribbean, https://www.infralatam.info/home/.
The failure to maintain and expand capital stock is estimated to cost the region nearly 1% of forgone GDP growth annually, with cumulative losses potentially reaching 15% over a decade (Mooney et al., 2025[4]). Sustained underinvestment in the Caribbean has resulted in infrastructure deficits that hinder productivity and amplify climate vulnerability. Infrastructure gaps across the region, exacerbated by extensive damage to infrastructure from climate disasters, are often characterised by outdated energy systems, weak transport connectivity and uneven digital access. Reversing this trend is strategic as efficient transportation networks in the Caribbean can improve market access, while reliable energy systems can promote economic diversification and digital connectivity foster innovation and technology adoption (Mooney et al., 2025[4]). Digital infrastructure will be particularly important to raise the productive capacity of Caribbean economies (Chapter 2)
Breaking this cycle requires a strategic shift towards climate-resilient infrastructure. Evidence indicates that every dollar spent on resilient infrastructure can yield up to USD 4 in economic benefits by mitigating future losses and ensuring continuous service delivery (Hallegatte, Rentschler and Rozenberg, 2019[66]). Consequently, closing the estimated USD 21 billion investment gap to attain the Sustainable Development Goals (SDGs) by 2030 could generate over USD 84 billion in economic growth (Brichetti et al., 2021[79]). Such investments would catalyse a virtuous circle: enhanced resilience attracts more stable investment; improved infrastructure boosts productivity and stronger public finances create the capacity for further developmental expenditure. Ultimately, this provides a sustainable pathway to escape the region’s low-productivity trap.
As in other market‑based economies, the private and public sectors drive investments in most Caribbean countries, although with considerable variation between economies. In the latest year with available data, private sources financed nearly 80% of total investment, on average, in the region, slightly above the Latin American average (75.7%) and below the OECD average (84.2%). Public investment represented 20%, on average, in the Caribbean (Figure 1.20). Guyana represents a notable exception, where public investment accounted for 54% of total investment, mainly concentrated in the oil sector. In all other Caribbean nations, however, public investment represented less than half of total investment. This ranged from 40.3% in Saint Vincent and the Grenadines (the second highest share after Guyana) to 5.6% in the Dominican Republic.
Public investment is fundamental in providing the foundational infrastructure that private actors often undersupply due to limited profitability. This is particularly true in technology-intensive sectors. In renewable energy and digital systems, for example, private investment not only brings essential capital but technological innovation, managerial expertise and integration into global value chains (Mooney et al., 2025[4]). The transformative impact of such technology transfer is clear: empirical evidence shows that a 10% increase in broadband penetration can raise GDP per capita by 1.4% in developing countries. This suggests that closing the digital infrastructure gap with OECD nations could substantially raise productivity levels across the Caribbean (Minges, 2015[80]; Rosenblatt et al., 2022[81]). Therefore, attracting private investment is crucial to close infrastructure deficits, enhance labour market efficiency and foster local innovation.
Note: The OECD average is a simple average of all Member countries in 2019. The LAC average is a simple average of the countries for which data were available in the dataset: Antigua and Barbuda, Argentina, The Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, São Tomé and Príncipe, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Uruguay and Venezuela. See the Methodological Annex 1.A at the end of the chapter for general government and private investment calculations. The shares of total investment corresponding to private and general government investment were calculated taking into consideration the respective percentages of GDP represented by each category.
Source: Authors’ elaboration based on IMF (2025[6]), World Economic Outlook, https://www.imf.org/en/Publications/WEO/weo-database/2024/April.
Foreign direct investment: A key source of finance for sustainable development in the Caribbean
In 2024, foreign direct investment (FDI) net inflows in the Caribbean represented 6.3% of GDP (4.2%, excluding Guyana), above 2.5% in Latin American countries (Figure 1.21). The regional average of FDI inflows remains aligned with historical levels: 6.8% in 2023, 6.13% for 2018‑2022 and 6.15% between 2013‑2017 (OECD/IDB, 2024[9]). FDI flows vary across countries, ranging from 1.5% of GDP in Jamaica and 3.6% in the Dominican Republic to up to 35% of GDP in Guyana, which has attracted large FDI inflows since 2017 following major oil discoveries. Figures for 2025 show similar FDI inflows of around 30% of GDP for Suriname as it follows Guyana’s footsteps, following the development of the GranMorgu offshore oil project (IMF, 2026[82]).
FDI can help bridge investment gaps in the context of limited fiscal space and constrained domestic investment in the region, supporting the development of key sectors (Chapter 2). It can support digital transformation, expansion of renewable energy, and export sophistication and diversification (OECD, 2025[83]). Moreover, FDI can generate positive spillovers in recipient economies: foreign firms often outperform domestic ones thanks to their access to advanced technologies, managerial expertise and greater capital intensity. These advantages can spread to local firms through supply-chain linkages, competitive pressure, demonstration effects and knowledge transfers. In this way, they narrow productivity and innovation gaps, while supporting structural transformation (OECD, 2019[84]; OECD et al., 2023[85]). However, the impact of FDI is not automatic; it depends on enabling conditions and policies of host countries (OECD, 2022[31]).
Source: Authors’ elaboration based on World Bank (2025[32]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators.
Greenfield FDI main flows are concentrated in the largest Caribbean economies
Greenfield FDI trends vary considerably across Caribbean economies. Among the different forms of FDI, greenfield investment refers to the establishment of new facilities or the expansion of existing operations by foreign investors and is typically associated with capital formation and job creation.
Since 2019, Guyana has become the leading recipient of greenfield investment in the region. This position has been driven by strong investor interest in its oil sector and exceptionally large project values compared to its Caribbean peers. Between 2014 and 2024, total greenfield investment in the Caribbean reached USD 80 billion, which means that 52% of this capital was directed to Guyana alone (USD 41.4 billion in 2024).
Between 2014 and 2024, Caribbean countries, excluding Guyana, attracted USD 38.4 billion in greenfield investment (Financial Times, 2024[86]). The distribution roughly mirrors the size of national economies, with the Dominican Republic accounting for USD 18 billion (46% of the total), followed by Cuba with USD 7 billion (19%) and Jamaica with USD 5 billion (12%) (Figure 1.22, Panel A). These three countries receive 77% of all greenfield investment entering the region (excluding investment into Guyana). This shows important contrasts across Caribbean countries – an important aspect to consider when interpreting investment data. The number of projects also varies significantly across countries, ranging from 219 in the Dominican Republic, 82 in Cuba, 80 in Jamaica and 37 in Guyana to 6 in Antigua and Barbuda, and 4 in Dominica (Figure 1.22, Panel B).
Greenfield FDI in the Caribbean has been mostly directed to the services sector
Greenfield FDI in the Caribbean has predominantly targeted the services sector, although patterns vary across the region. In several countries, services account for more than half of total investment, reflecting the services-oriented nature of many Caribbean economies (Figure 1.22, Panel C). Key sectors attracting investment include accommodation and food, information communication and technology (ICT), and financial services. Even in countries with more diversified economic structures, such as the Dominican Republic, and Trinidad and Tobago, services continue to play a central role, with manufacturing and energy attracting comparatively smaller shares. In contrast, Guyana, a commodity exporter economy, has received the bulk of its FDI in hydrocarbon extraction and mining. In some cases, this heterogeneity mirrors underlying production structures, while in others it is driven by the concentration of inflows in a small number of large projects.
Note: Greenfield FDI refers to announced greenfield FDI projects.
Source: Authors’ elaboration based on Financial Times (2024[86]), fDi Markets, https://www.fdimarkets.com/.
Companies from the European Union and the United States are the leading greenfield investors in the Caribbean
Between 2014 and 2024, the United States invested USD 48 billion, accounting for 60% of total greenfield investment in the region (Figure 1.23, Panels A and B). This trend has been driven by the interest of U.S. companies in Guyana since 2019, following its oil boom. However, when excluding Guyana, the investment landscape reveals a more diversified profile. In the same period, investors from the EU have led greenfield investment in the Caribbean, investing USD 14 billion and accounting for 36% of total greenfield investment in the region, followed by the United States (18%), Latin American and Caribbean (LAC) countries (12%), the People’s Republic of China (8%), the United Kingdom (6%) and other countries (20%) (Figure 1.23, Panel B).
Note: Other refers to the rest of the world. Greenfield FDI refers to the capital investment of announced greenfield FDI projects.
Source: Authors’ calculations based on Financial Times (2024[86]), fDi Markets, https://www.fdimarkets.com/.
FDI has contributed to employment creation in the Caribbean
Over the past decade, greenfield FDI announced projects have generated 196 021 jobs in the Caribbean. Services sectors account for 65% of total FDI-related employment (126 776 jobs), followed by manufacturing with 22% (43 284 jobs), mining (6%), construction (5%) and energy (2%) (Figure 1.24). Within services, the largest share of jobs has been generated in accommodation and food, as well as in administrative and support activities. Evidence for the LAC region shows a positive association between FDI inflows and employment growth (Craigwell, 2006[87]; Modrego et al., 2022[88]). However, the impact is not automatic. To maximise job creation, policy efforts must focus on strengthening workforce skills, developing domestic supplier networks and aligning investment attraction with inclusive employment objectives (OECD, 2025[83]).
Source: Authors’ calculations based on Financial Times (2024[86]), fDi Markets, https://www.fdimarkets.com/.
Job quality in foreign firms varies across Caribbean countries
Beyond job creation, the quality of employment is crucial for ensuring the sustainable development impact of investment. Job quality encompasses wages, working conditions, opportunities for skills development and inclusion of vulnerable groups. Foreign investors often provide higher wages, better working conditions and greater access to training than domestic firms, particularly in developing countries and emerging economies. However, the extent to which FDI enhances job quality depends on the sector, type of investment and the host country’s labour market characteristics, including its legal and policy frameworks (OECD, 2019[89]; OECD, 2022[31]).
Foreign firms tend to pay higher salaries in the Caribbean. In Barbados, Dominican Republic and Suriname, foreign firms reported paying higher average wages than domestic firms, possibly reflecting their greater presence in large formal export industries and adherence to global labour standards (Figure 1.25, Panel A). In countries like Jamaica, the Dominican Republic and Barbados, foreign firms also employ a higher share of permanent full-time employees, offering more stable jobs with formal labour conditions and stronger job security. However, in other economies, the share of full-time employees in foreign firms is lower (Figure 1.25, Panel B). This may be influenced by sectoral characteristics, such as tourism or seasonal industries, local labour regulations or cost constraints that favour temporary or flexible employment arrangements.
Note: The indicators show the relative gap between the average outcomes of foreign and domestic firms, such as the difference between the average wage in foreign and domestic firms, divided by the average wage in domestic firms. Positive values indicate that foreign firms outperform domestic firms (e.g. offer higher average wages), while negative values suggest the opposite. Indicators are based on the World Bank Enterprise Surveys (World Bank, 2024[90]). Reference years vary across countries: Barbados (2023), Dominican Republic (2016), Jamaica (2024) and Suriname (2018).
Source: OECD FDI Qualities Indicators and FDI Qualities Indicators Visualisation Platform, https://www.oecd.org/en/data/dashboards/fdi-qualities-indicators-visualisation-platform.html.
FDI can play a key role in advancing the digital transformation of Caribbean economies
FDI in information and communication technology (ICT) sectors can accelerate digital transformation by financing digital infrastructure and facilitating the transfer of technology and skills. Between 2014 and 2024, greenfield FDI in digital services amounted to USD 3 billion in the region. These investments account for a significant share of total greenfield FDI in several Caribbean countries, notably Dominica (61%), Trinidad and Tobago (53%), and Suriname (44%). They have focused on activities such as computer programming, information services and telecommunications (Figure 1.26). Evidence indicates that investment in digital infrastructure is associated with higher GDP and productivity in the Caribbean. Thus, prioritising such investment could be pivotal for accelerating development, especially in lower-income economies (Rosenblatt et al., 2022[81]) (Chapter 2).
Note: Digital sectors include digital services (e.g. computer programming activities, data processing and hosting activities, information services activities, etc.); ICT goods (electronics, computer equipment, etc.); electric components (batteries, electrical equipment, wiring devices, etc.) and telecommunications (wired and wireless telecommunications activities and satellite activities).
Source: Authors’ calculations based on Financial Times (2024[86]), fDi Markets, https://www.fdimarkets.com/ and FDI Qualities Indicators Visualisation Platform, https://www.oecd.org/en/data/dashboards/fdi-qualities-indicators-visualisation-platform.html.
FDI in the industrial sector is important for some countries in the region
Greenfield FDI trends in the industrial sector vary significantly across countries. Between 2014 and 2024, greenfield FDI in industry represented 11‑17% of total inflows in countries such as Cuba, the Dominican Republic, Jamaica, and Trinidad and Tobago, and up to 96% in Haiti, spread across multiple projects (Figure 1.27, Panel A). In many cases, investment is concentrated in light manufacturing, such as food products and textiles. In others, it targets more technology-intensive industries, including pharmaceuticals, chemicals, ICT goods and electronic components (Figure 1.27, Panel B).
While services are central to many Caribbean economies, niche manufacturing has emerged as a priority in some countries to drive diversification and attract foreign investment. Several countries – including the Dominican Republic, Trinidad and Tobago, Jamaica, Belize, Barbados, Grenada and Guyana – are promoting sectors such as pharmaceuticals, chemicals and light manufacturing like food products and textiles. These industries can help reduce dependence on tourism and commodities. Empirical evidence shows that FDI can support production transformation by enhancing export sophistication, export diversification and industrial capacity (OECD et al., 2025[43]). Also, high-tech manufacturing around the world depends on sophisticated services as inputs (Miroudot and Cadestin, 2017[91]). Investment in high-tech services can support access to international markets and mobilise resources to diversify economic activity and expand productive bases.
Note: Tech-intensity groups are based on the OECD Technology Classification. Capital investment corresponds to ISIC Rev.4 Divisions A–C, covering the primary sector and manufacturing industries
Source: Authors’ calculations based on Financial Times (2024[86]), fDI Markets, https://www.fdimarkets.com/.
Increasing FDI in renewable energy can support the green transition in the Caribbean
FDI can play a key role in advancing the region’s energy transition. Such investments can help modernise energy systems, improve efficiency and reduce dependence on imported fossil fuels. By bringing cutting-edge technologies and best practices, FDI can foster local capacity building and support greener and climate-resilient infrastructure. This is particularly important in a region where imported fossil fuels supply around 80% of electricity generation, contributing to high energy costs, and where ageing diesel-fired plants remain vulnerable to hurricanes, floods and droughts (World Bank, 2025[37]). Expanding renewable energy would not only lower generation costs and improve efficiency, but also shield economies from volatile global fuel prices and promote a more diversified energy mix.
Renewable energy greenfield FDI varies across Caribbean economies. Between 2014 and 2024, the region attracted USD 5 billion across 36 projects. The Dominican Republic, by far the largest economy, accounted for USD 4.2 million (74% of total investment) across 26 projects, supported by macroeconomic stability, renewable energy targets and incentives such as tax exemptions, feed-in tariffs and streamlined regulatory processes (ECLAC, 2023[92]; Pichardo, 2025[93]). Jamaica followed with USD 0.4 billion across four projects, while Barbados attracted USD 0.4 billion through two projects (Figure 1.28, Panel A). Other small economies secured single projects during this period. Although absolute investment amounts in smaller economies may seem modest, they represent a significant share of total greenfield FDI. In Suriname and Barbados, for example, renewable energy investment accounted for 53% and 45% of total greenfield FDI over the period, respectively, highlighting the relative scale and importance of these investments (Figure 1.28, Panel B).
Note: Greenfield FDI refers to announced greenfield FDI projects.
Source: Authors’ calculations based on Financial Times (2024[86]), fDi Markets, https://www.fdimarkets.com/.
FDI can support the transition to a cleaner and more sustainable energy mix. Empirical evidence shows that greenfield FDI in renewable energy is positively associated to both the expansion of clean energy supply and the transformation of energy matrices in recipient countries. In LAC, a 10% increase in capital investment in the renewable energy sector is associated with an increase of 0.79 tonnes of oil equivalent (toe) per 1 000 people in renewable energy supply. It also corresponds to an increase of 0.03 toe per million USD of GDP (purchasing power parities) and a 0.19 percentage point rise in the share of renewables in the energy matrix, all else being equal (Figure 1.29) (Annex 1.B). These results suggest that greenfield FDI may be particularly effective in supporting the region’s energy transition, potentially reflecting higher technological spillovers, stronger environmental safeguards or greater alignment with long-term sustainability goals.
Note: The figure displays the estimated percentage point impact of a 10% increase in capital investment from announced renewable energy FDI projects on three variables along with their 95% confidence intervals. Caribbean countries included in the analysis are the Dominican Republic and Jamaica. Other countries were not covered due to limited data or variables’ lack of variation over time.
Source: Authors’ calculations based on IRENA (2023[94]), Renewable Energy Statistics; OLADE (2023[95]), sieLAC: Energy information system of Latin America and the Caribbean, https://sielac.olade.org/; Financial Times (2024[86]), fDi Markets, https://www.fdimarkets.com/.
This chapter has underscored the importance of strengthening macro-structural conditions in Caribbean countries, while advancing social inclusion by addressing poverty, inequality and informality, and enhancing resilience to the region’s climate-related vulnerabilities. It also argues that reinforcing investment levels will be essential to overcome longstanding development challenges in the region and harness the potential of new opportunities. Box 1.3 highlights key messages presented in the chapter that can inform national, regional and international policy action in the medium term.
Unpacking macroeconomic dynamics and structural features in the Caribbean
Macroeconomic conditions are characterised by modest potential growth, low productivity and high debt levels, partly explained by persistent low productivity.
High public debt levels remain a challenge in many Caribbean economies, constraining fiscal space.
Trade patterns reveal a divide between service-oriented and merchandise-exporting economies, and an overall reliance on merchandise imports.
The limited diversification of export baskets reflects the region’s production structure and highlights several underlying constraints that hinder its potential growth.
Caribbean exports are concentrated in a few major partners, although destination patterns vary significantly across countries, while Caribbean services exports are largely focused on tourism in most countries.
Advancing social inclusion in the Caribbean: Tackling poverty, inequality and informality
Poverty, informality and inequality remain high, although significant heterogeneity persists across Caribbean countries.
Unemployment rates have declined over the past decade, although employment levels remain low, with women, youth and older persons particularly affected.
Building resilience to confront environmental risks and climate vulnerabilities
Climate-related extreme weather events are increasingly frequent in the Caribbean, posing severe risks for its inhabitants and tourists, although Caribbean contribution to global greenhouse gas emissions is among the lowest worldwide.
The share of renewables in the Caribbean's electricity matrix remains low and has been increasing at a modest pace.
High water stress and inefficient water use remain challenges in the Caribbean, although some countries are making notable progress towards more effective water management.
Investment as a driver to unlock development potential in the Caribbean: Main trends and features
Total investment in the Caribbean has grown in the last decade, but still fails to meet the required levels for development.
Government spending on infrastructure is low, reinforcing infrastructure gaps across the region.
Foreign direct investment is a key source of finance for sustainable development in the Caribbean.
FDI has contributed to employment creation in the region and can play a key role in advancing the digital transformation, promoting manufacturing activities and supporting the green transition in Caribbean economies.
Greenfield FDI main flows are concentrated in the largest Caribbean economies, mostly directed to the services sector and led by companies from the European Union and the United States.
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Regarding the investment and capital stock dataset (IMF, 2025[6]): Public investment is measured using gross fixed capital formation of the general government (i.e. central plus subnational governments). This approach does not include: i) investment grants, which are transfers from central and/or subnational governments to public and private entities outside the general government to support investment in fixed assets; ii) loan guarantees; iii) tax concessions, such as those for mortgage interest, R&D, and municipal bonds; iv) the operations of public financial institutions, such as development banks, that provide long‑term funding at subsidised rates; and v) government‑backed saving schemes.
Statistics for the OECD countries are taken from the OECD Economic Outlook. Specifically, the series retrieved (in national currency and constant prices) is comprised of general government GFCF and total GFCF.
This analysis draws on fixed-effects (FE) panel regressions to assess the impact of greenfield FDI on three renewable energy outcomes. The model covers 16 LAC countries over the period 2003‑2023 and is specified as follows:
Where is one of the following the dependent variables for country i in year t:
1. Renewable energy supply per capita
Measures the amount of renewable energy available per person, expressed in tons of oil equivalent (toe) per 1 000 inhabitants. It reflects the intensity of renewable energy supply relative to population size, offering insights into access and distribution of clean energy.
2. Renewable energy supply per unit of output
Captures the volume of renewable energy supplied per unit of economic output, measured in toe per million USD of GDP (PPP). It serves as a proxy for the energy intensity of the economy, indicating how efficiently renewable energy is integrated into production.
3. Share of renewables in the primary energy matrix
Represents the proportion of a country’s primary energy derived from renewable sources. It reflects the level of renewable energy integration in the national energy matrix and the shift away from fossil fuel dependence.
All dependent variables are sourced from OLADE-sieLAC, a comprehensive regional database that compiles and harmonizes energy statistics for Latin America and the Caribbean.
The main explanatory variable is the 2-year lagged capital investment from renewable energy announced projects, capturing delays between project announcements and operational impact. It is sourced from the fDi Markets database, which tracks cross-border greenfield investment.
Control variables include electricity consumption (MWh per 1 000 people) and 2-year lagged public investment in renewable energy (as a percentage of GDP). Regressions include country and year fixed effects, and standard errors are clustered at the country level.
Caribbean economies included are the Dominican Republic and Jamaica. Other countries were not covered due to limited data or variables’ lack of variation over time.
The results reflect robust empirical associations but do not establish causal relationships.