Caribbean Growth Forecast at 2.1%
The Inter-American Development Bank (IDB) is projecting that economies in Latin America and the Caribbean will grow by 2.1% in 2026. This forecast puts regional growth in line with its long-run average. The projection comes amid what the IDB describes as global uncertainty and persistent local challenges.
The 2.1% growth projection for Latin America and the Caribbean follows a 2.2% expansion in 2025 and reflects a return to the region's long-run average. This modest growth is set against a backdrop of global uncertainty, including shifting trade policies and fluctuating commodity prices that create external headwinds for the region's economies. For Jamaica, the economic outlook for 2026 has been dramatically reshaped by the impact of Hurricane Melissa in late 2025. Initial forecasts for growth have been revised to a contraction of 1% to 3% for the 2026/27 fiscal year, according to the Bank of Jamaica. The Planning Institute of Jamaica (PIOJ) projects the economy will not see a return to year-on-year growth until the fourth quarter of 2026. The category-five hurricane caused an estimated US$8.8 billion in physical damage, equivalent to 41% of Jamaica's 2024 GDP, making it the most costly hurricane in the nation's history. The damage to infrastructure, agriculture, and the housing stock has led to projections of a significant fall in output and demand in the short to medium term. Recovery in the crucial tourism sector is underway, with a target for full operational readiness by May 2026. Tourism officials are optimistic, expecting visitor arrivals to reach 95% to 98% of pre-hurricane levels by the end of the year, supported by expanded airlift from major airlines. However, small businesses in hard-hit areas like Montego Bay face a difficult road to recovery. Many are grappling with the loss of property and goods, slow restoration of electricity, and a sharp decline in customers, with some reporting sales down by as much as 80%. Despite the severe shock, Jamaica's financial system has shown resilience, and the country's international reserves remain strong. The government has outlined an ambitious infrastructure development agenda for the 2025/2026 fiscal year, including the completion of the Montego Bay Perimeter Road, which is intended to foster economic growth. A full economic recovery to pre-hurricane output levels is conservatively projected to take three to five years.
