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Caribbean Economic Overview Summary: The world economy remained resilient thus far in 2025, despite shifting global trade dynamics and persistent geopolitical instability. Following sweeping new tariff announcements by the US and retaliatory actions by major trading partners early in the year, the US negotiated trade deals with several countries, but reverted to higher tariff rates for those unable to reach an agreement. While US effective tariff rates have declined relative to April’s high, they remain noticeably above 2024’s level. Meanwhile, a US-brokered ceasefire halted the 12-day Israel-Iran conflict that dramatically escalated following Israel’s attack on Iran in June. However, the war in Ukraine continued relentlessly despite a few attempts at securing a peace deal. Notwithstanding the heightened policy and geopolitical uncertainty, global economic activity held up in H1 2025, though most recent data point toward some slowing. In the US, the region’s largest trading partner, real GDP advanced at an annualised rate of 3.8% in Q2, largely reflecting reduced imports after stockpiling in Q1, partly offset by lower exports and investment. Since then, the US labour market displayed signs of weakening – job gains slowed and the unemployment rate edged up to 4.3% in August – prompting the Federal Reserve to cut interest rates by 25bps in September and October, even though inflation continued to trend higher. Specifically, US inflation rose to 3.0% y/y in September 2025 from 2.4% y/y one year earlier, remaining above target but exhibiting limited signs of tariff impact. Economic activity in the Caribbean generally maintained a positive growth trajectory. However, the pace of tourism expansion softened reflecting post-recovery normalization in most territories, alongside airlift capacity constraints and elevated uncertainty in major source markets. Growth in stay-over arrivals to the region1 decelerated to 2.1% y/y during H1 2025, while outbound travel from the US – the largest source market – to the Caribbean slowed sharply to 0.3% y/y during January to June relative to 9.9% growth one year earlier. Further, latest available data for the year-to-date indicate that stay-over arrivals declined y/y in Grenada, St. Lucia, The Bahamas, Jamaica and Turks and Caicos Islands. However, arrivals to all other markets increased, with St. Kitts and Nevis, St. Vincent and the Grenadines, Curaçao and Sint Maarten posting double-digit percentage growth. Cruise passenger arrivals to the region1 climbed 6.6% y/y at June 2025 dominated by increased visitors to The Bahamas, Barbados, Turks and Caicos Islands, Sint. Maarten and St. Kitts and Nevis. However, arrivals to St. Lucia, Antigua and Barbuda, Jamaica, Aruba, and Curaçao contracted. Following a modest decline overall for 2024 partly attributed to the impact of Hurricane Beryl, economic activity in Jamaica advanced y/y during H1, but real GDP in Trinidad and Tobago fell 2.5% y/y in Q1, reflecting lower output of both the energy and non-energy sectors. Regional inflation eased further in H1 2025 in line with lower global commodity prices. Average inflation2decelerated to 1.4% y/y in June 2025 from 2.1% y/y one year earlier, reflecting slower growth in all markets except Cayman Islands, St. Lucia, St. Kitts and Nevis, and Trinidad and Tobago, where rates remained below 2%, and the Dominican Republic, where it remained within the central bank’s 3.0% to 5.0% target range. Further, Jamaica’s inflation rate slowed sharply to 2.1% y/y in September 2025, the fourth consecutive month below the Bank of Jamaica’s (BOJ) 4% to 6% target range. However, the BOJ held its policy rate steady at 5.75% in September, on the basis that the inflation breach largely reflecting temporary factors, and core inflation remained within the target. Fiscal efforts coupled with broadening economic activity spawned better public finance positions in most markets, with a few obtaining sovereign credit rating upgrades. Notably, the Government of the Bahamas achieved a 0.5% of GDP fiscal deficit in FY2024/25, close to the US$69.8mln original deficit target, while the Government of Barbados posted an improved fiscal surplus for the first half of FY2025/26. A surge in non-tax-receipts linked to the securitization on airport revenue augmented Jamaica’s fiscal position, while public debt declined to a remarkable 61% of GDP at August 2025, albeit partly on account of methodological revisions to GDP. Accordingly, Standard and Poor’s upgraded the sovereign credit ratings of The Bahamas and Jamaica from ‘B+’ to ‘BB-’ and ‘BB-’ to ‘BB’, respectively, in September, and Barbados from ‘B’ to ‘B+’ in October. Further, in August, Moody’s upgraded Dominican Republic’s sovereign credit rating from ‘Ba3’ to ‘Ba2’. Conversely, higher public spending outweighed an expansion in revenue collections worsening the Government of Trinidad and Tobago’s fiscal deficit, while Standard and Poor’s affirmed its ‘BBB-’ sovereign credit rating for the twin island republic, but revised the outlook from ‘negative’ to ‘stable’ citing weaker public finances. International reserves of most territories climbed and/or remained elevated over the most recent 12-month period. Exceptionally though, domestic FX conditions in Trinidad and Tobago remained constrained and reserves continued on a steady downward trajectory, falling sharply to 24 weeks of import cover in September. Banks’ loan growth sustained a strong performance, but deposit growth outpaced the credit expansion over the 12 months to June 2025, while asset quality and profitability improved in most markets. In its October 2025 World Economic Outlook (WEO), the IMF revised upward its projection for global real GDP growth but cautioned that adverse effects of the trade policy shocks are starting to emerge. Global real GDP growth is now projected to slow from 3.3% in 2024, to 3.2% in 2025, and 3.1% in 2026. In the US, real GDP is now projected to advance by 2.0% in 2025, and 2.1% in 2026, both 0.1 percentage point upgrades relative to the July 2025 Outlook. However, US inflation is expected to continue trend higher over the second half of 2025, as the tariff impact becomes more visible, before returning to target in 2027. Yet, the Federal Reserve could likely cut interest rates again before year-end if labour market concerns continue to outweigh inflationary pressures. Meanwhile, Caribbean economies are expected to continue to expand in 2025 and 2026, while a modest pick-up in inflation is likely, in line with higher expected US inflation. However, uncertainty around the global and regional outlooks remains acute. Any escalation of trade measures or geopolitical conflicts could worsen global growth prospects and/or induce commodity price shocks, while deeper-than-anticipated slowdowns in key source markets could further dampen the region’s tourism outturn. In early October, the US granted Trinidad and Tobago a six-month license to engage in negotiations with Venezuela to pursue the stalled Dragon gas project. However, Venezuela has since suspended energy agreements with Trinidad and Tobago, after the country accepted a US warship amid military tensions between the US and Venezuela.Further, vulnerability to tropical cyclones remains a significant risk, with the northern Caribbean now assessing the catastrophic impact of Hurricane Melissa. 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