Amid the ongoing military conflict in the Middle East that has sent global energy prices soaring, the International Monetary Fund (IMF) has flagged that tourism-reliant Caribbean economies are at the highest risk of severe economic disruption from the shock, according to Nigel Chalk, director of the IMF’s Western Hemisphere Department. Speaking from Washington, Chalk laid out the structural vulnerabilities that make this group of nations particularly exposed: already elevated public debt levels, extremely limited fiscal room to maneuver, and a long-standing status as large net energy importers — even after years of investments in renewable energy transition across the region. A key additional layer of uncertainty that the IMF is closely monitoring is the indirect impact of higher energy costs on global air travel and tourist demand, two critical pillars of economic activity for most Caribbean island nations. The outlook for the region already reflects divergent growth trajectories across different economic groups, the IMF confirmed in its latest projections released late last week. Overall, the 15-nation Caribbean Community (Caricom) bloc is set to post mixed growth results over the 2026–2027 forecast period. Aggregate average growth for the entire bloc is projected to hit 5.7% in 2026 and 8.6% in 2027, driven by strong performance from regional commodity exporting nations, which are forecast to see growth as high as 19.1% over the two-year window. In stark contrast, tourism-dependent economies will see far softer expansion, averaging just 0.9% growth in 2026 and 2.2% in 2027, while non-tourism dependent smaller economies are projected to grow between 7.9% and 11.3% across the two years. Breaking down projections for individual island nations, Jamaica and Grenada are both expected to contract by 1.2% in 2026 before rebounding to 3.1% growth in 2027. Antigua and Barbuda is forecast to grow 2.6% and 2.4% respectively over the two years, while The Bahamas will see growth dip slightly from 2.1% in 2026 to 1.9% in 2027. Barbados is projected to record growth of 2.5% and 2.2%, Belize 2.2% and 2.1%, and Dominica 3.1% and 2.8%. St Kitts and Nevis will see a small uptick from 2% in 2026 to 2.5% in 2027, while St Lucia will see growth decline from 2% to 1.7%, and St Vincent and the Grenadines will drop from 3% to 2.7%. Chalk noted that a number of Caribbean governments have already implemented policy measures to soften the blow of rising oil costs for consumers and businesses. Many countries have pre-existing price smoothing mechanisms that prevent the full brunt of global energy price increases from being passed through to domestic consumers immediately, buying critical time for economies to adjust. However, the IMF is cautioning against the permanent expansion of general energy subsidies, a common policy response to price shocks that Chalk says carries significant long-term risks. Broad energy subsidies are inherently untargeted, he explained, with the largest benefits accruing to wealthier households rather than the low-income groups that need support most. Beyond distributional concerns, the volatile trajectory of global oil prices triggered by the Middle East conflict makes open-ended subsidy commitments extremely risky: if prices continue to climb, the fiscal cost of these subsidies could quickly spiral to unsustainable levels, worsening the region’s already stretched public balance sheets. Instead, the IMF advises Caribbean nations to allow market pricing mechanisms to work, encouraging households and businesses to adjust energy demand gradually, which reduces overall pressure on national economies while avoiding long-term fiscal risks. Turning to the question of regional migration to the United States, Chalk said the IMF does not expect the current economic headwinds to trigger a large sudden wave of northbound migration from the Caribbean. He noted that the broader region holds relatively solid economic fundamentals with limited near-term risk of a severe broad-based downturn, which removes a key driver of mass migration. While acute migration challenges persist for specific troubled nations such as Venezuela and Haiti, there is no indication at this stage that a sudden, large-scale migration push from the Caribbean to North America is on the horizon, he added.
Tourism-dependent countries to be most impacted by Middle East conflict, IMF warns
