BRIDGETOWN, Barbados – The Caribbean faces a growing wave of geopolitical, economic, and climate-related shocks, but the Region’s greatest challenge may be the structural vulnerabilities that leave its economies exposed to external crises.
This was the key message emerging from “Shockwaves: How Global Crises Are Hitting the Caribbean”, a special EDGE X by CDB: Analytics Unlocked session held during the Caribbean Development Bank’s 56th Annual Meeting in Nassau, The Bahamas.
Dr Oronde Small and Xavier Ajani Malcolm, Economists at the Caribbean Development Bank (CDB/the Bank), examined how overlapping global disruptions – including shifting trade policies, geopolitical conflicts, climate change, declining development assistance, and multilateral fragmentation – are affecting Caribbean economies and what policymakers can do to strengthen resilience.
The Caribbean is confronting not one crisis, but a confluence of overlapping and compounding shocks, Malcolm explained, pointing to the risk of climate-related disasters, an America-first trade policy, fragmented multilateralism, the conflict in Iran, the US military intervention in Venezuela and the Caribbean, and the ongoing humanitarian crisis in Cuba. The region’s exposure to these external events is magnified by longstanding structural challenges, including narrow economic bases, concentrated export markets, import dependence, low productivity and high levels of informality, he added.
Recent changes in global trade policy – particularly increases in the level of US tariffs and uncertainty about future US tariff levels – create risks for the cost of financing, investment and trade levels in the region, with tourism-dependent economies facing greater exposure. The region is also highly dependent on imports of food and fossil fuels, leaving it vulnerable to changes in commodity prices.
The decline in international development assistance represents another concern. Net official development assistance fell globally by more than 8 percent in 2024, while several Caribbean countries experienced significant reductions in US development financing in 2025. These trends could constrain access to concessional resources at a time when many countries face increasing development and climate adaptation needs.
Malcolm also drew attention to the Caribbean’s exposure to climate change. The region experiences significantly higher natural-hazard-related damage than other small states and faces growing risks from rising temperatures, more intense hurricanes, and climate-related economic disruptions. Beyond direct impacts, climate-related shocks in major trading partners and tourism source markets can also affect Caribbean growth through reduced investment and visitor arrivals, he said.
Dr Small noted that heightened uncertainties and recent geopolitical events had negative implications for an already vulnerable region, with small, open, tourism-dependent countries most vulnerable to the current crises.
“It’s becoming increasingly clear that these are not episodic events. They are structural features of the global space and have potentially significant implications for [the Bank’s] Borrowing member countries,” he said.
Despite the challenges, Malcolm and Dr Small underscored opportunities for the region to build resilience through targeted policy action aimed at diversifying export markets and products, accelerating the transition to renewable energy, strengthening food security, boosting productivity and innovation, enhancing climate resilience, improving public finances, and deepening regional cooperation.
CDB borrowing member countries with strong institutions – particularly those with strong fiscal institutions – will be better positioned to withstand the adverse effects of the current shocks, they said.