An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

Re­port­ing from Bridgetown, Bar­ba­dos

New geopo­lit­i­cal ten­sions are al­ready rip­pling through glob­al mar­kets, and the Caribbean is watch­ing close­ly.

Speak­ing yes­ter­day at the Caribbean De­vel­op­ment Bank’s (CDB) an­nu­al news con­fer­ence in Bar­ba­dos, Act­ing Deputy Di­rec­tor of Eco­nom­ics Ja­son Cot­ton warned the emerg­ing con­flict in­volv­ing the Unit­ed States and Iran presents a live ex­ter­nal threat to the re­gion’s frag­ile growth out­look for 2026.

The CDB’s base­line pro­jec­tion points to eco­nom­ic ex­pan­sion of 1.1 per cent next year when Guyana is ex­clud­ed. With Guyana in­clud­ed, re­gion­al growth ris­es sharply, dri­ven by that coun­try’s oil-fu­elled ex­pan­sion.

Cot­ton ex­plained that the fore­casts were pro­duced against a back­drop of “con­sid­er­able un­cer­tain­ty” and clear down­side risks. The lat­est flare-up of ten­sions has al­ready trig­gered an up­swing in com­mod­i­ty prices, re­vers­ing the soft­er trend seen in re­cent months.

For com­mod­i­ty-ex­port­ing economies in the Caribbean, firmer prices could trans­late in­to high­er ex­port earn­ings. En­er­gy and min­er­al pro­duc­ers may see a short-term boost. But most CDB bor­row­ing mem­ber coun­tries are ser­vice-based economies, heav­i­ly de­pen­dent on tourism and im­ports. For them, high­er glob­al prices pose a dif­fer­ent chal­lenge.

Ris­ing en­er­gy and food costs feed di­rect­ly in­to in­fla­tion, squeez­ing house­hold bud­gets and rais­ing op­er­at­ing ex­pens­es for busi­ness­es. That, in turn, can damp­en con­sumer spend­ing, af­fect ed­u­ca­tion and so­cial ser­vices, and po­ten­tial­ly weak­en tourism de­mand if trav­el costs climb, Cot­ton point­ed out.

He stressed that the sit­u­a­tion re­mains flu­id. If the con­flict per­sists, both up­side and down­side risks will in­ten­si­fy. Com­mod­i­ty ex­porters could ben­e­fit, but ser­vice-ori­ent­ed economies may face stronger head­winds. For now, he in­di­cat­ed that the Bank is mon­i­tor­ing de­vel­op­ments close­ly be­fore ad­just­ing its cen­tral pro­jec­tions.

The growth di­ver­gence with­in the re­gion re­mains stark. Out­side of Guyana, over­all out­put across the Caribbean is ex­pect­ed to ex­pand mod­est­ly next year. Guyana’s econ­o­my, how­ev­er, con­tin­ues to surge at an ex­cep­tion­al pace, ex­pand­ing by more than 20 per cent and sig­nif­i­cant­ly lift­ing the re­gion­al av­er­age when ag­gre­gat­ed.

Among oth­er com­mod­i­ty ex­porters, per­for­mance is ex­pect­ed to vary, large­ly de­pend­ing on price move­ments and pro­duc­tion lev­els.

Ser­vice-ex­port­ing coun­tries are pro­ject­ed to record mod­er­ate gains, with tourism and con­struc­tion ac­tiv­i­ty play­ing a cen­tral role.

In­fla­tion trends in 2026 will hinge heav­i­ly on how glob­al com­mod­i­ty mar­kets evolve.

On the fis­cal front, sev­er­al gov­ern­ments are con­tin­u­ing ef­forts to strength­en rev­enue col­lec­tion and con­sol­i­date pub­lic fi­nances. Yet bud­get pres­sures re­main acute.

Post-dis­as­ter re­con­struc­tion costs, ris­ing pub­lic sec­tor wage bills, and a de­cline in cit­i­zen­ship-by-in­vest­ment re­ceipts are strain­ing fis­cal frame­works in some states. In a num­ber of cas­es, those pres­sures have pushed debt tra­jec­to­ries off pre­vi­ous­ly planned medi­um-term re­duc­tion paths, re­quir­ing cor­rec­tive mea­sures to re­store align­ment with es­tab­lished debt tar­gets.

Cot­ton cau­tioned that the bal­ance of risk re­mains tilt­ed to the down­side. Height­ened geopo­lit­i­cal ten­sions, glob­al pol­i­cy un­cer­tain­ty, and cli­mate-re­lat­ed shocks con­tin­ue to cloud the hori­zon. Fis­cal vul­ner­a­bil­i­ties are par­tic­u­lar­ly pro­nounced in high­ly in­debt­ed coun­tries with lim­it­ed fi­nan­cial buffers.

Pressed on how quick­ly Caribbean cit­i­zens might feel the im­pact of the Iran-re­lat­ed ten­sions, Cot­ton re­spond­ed blunt­ly, the ef­fects can be­gin im­me­di­ate­ly. He point­ed to the ex­pe­ri­ence in 2025, when tar­iff an­nounce­ments ini­tial­ly stoked fears of sus­tained in­fla­tion, yet sub­se­quent pol­i­cy re­spons­es mod­er­at­ed the pace of price in­creas­es by year-end.

With com­mod­i­ty prices again mov­ing sharply and fresh an­nounce­ments emerg­ing even yes­ter­day morn­ing, he de­scribed the en­vi­ron­ment as high­ly volatile. Of­fer­ing a pre­cise time­line would be im­pru­dent, he in­di­cat­ed, giv­en the num­ber of mov­ing parts in­flu­enc­ing glob­al sup­ply chains, pric­ing, and in­vestor sen­ti­ment.

CDB pres­i­dent Daniel Best ad­dressed a re­lat­ed con­cern: whether the re­gion’s re­cent re­bound rep­re­sents gen­uine eco­nom­ic strength­en­ing or mere­ly a cycli­cal bounce fol­low­ing the pan­dem­ic shock.

Analysing a week of dis­cus­sions with re­gion­al lead­ers in St Kitts, Best de­scribed a re­newed sense of am­bi­tion at the po­lit­i­cal lev­el. Gov­ern­ments, he in­di­cat­ed, are in­creas­ing­ly pur­su­ing projects de­signed to build re­silience, up­grade in­fra­struc­ture, and shift en­er­gy sys­tems, sig­nalling an in­tent to lock in more durable gains rather than re­ly on short-term re­cov­ery cy­cles.

The ur­gency, he sug­gest­ed, is clear. Struc­tur­al trans­for­ma­tion re­quires de­lib­er­ate pol­i­cy choic­es and sus­tained in­vest­ment, par­tic­u­lar­ly in a pe­ri­od marked by ex­ter­nal volatil­i­ty.