Interested in an economic overview of the Caribbean Market? We provide the latest detailed information for Corporate and Investment clients in our quarterly review.
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The global economy remained resilient during the first half of 2023 despite the severe headwinds challenging growth prospects. In its October 2023 World Economic Outlook, the IMF indicated that global economic growth outperformed expectations in Q2 largely reflecting a strong performance in the US, and a robust outturn in economies with heavy reliance on travel and tourism. At the same time, the sustained cycle of monetary policy tightening in advanced economies, alongside falling energy and other commodity prices, coincided with noteworthy progress in inflation reduction, though inflation rates generally remained above target levels. With borrowing costs at their highest level in more than 15 years, major Central Banks, including in the US, the UK, and Canada, paused interest rate hikes in Q3, but signalled their readiness to resume tightening if economic conditions warrant. Meanwhile, after retreating from their postpandemic peak by near 40% in June, oil prices started to swing upward in Q3 attributed to supply concerns. And, with the war in Ukraine still ongoing, the Hamas attack on Israel in early October which precipitated current war in Gaza, has ignited fears of further disruption to energy markets, should it mushroom into a wider conflict in the Middle East.
Notwithstanding the challenges facing the global economic landscape, economic activity in the Caribbean remained on its recovery path thus far in 2023, though at a more moderate pace as it approached pre-pandemic levels. Greater output of hotels and restaurants and construction ushered the expansion in most markets, also effecting growth in related economic sectors. The robust recovery of tourism services echoed the performance of stay-over arrivals to the region, which advanced 27.7% y/y during January to June virtually attaining 2019’s level. When disaggregated by market, arrivals to all markets achieved more than 70% of pre-pandemic levels, with arrivals to half of them, including Aruba, Curaçao, Grenada, Jamaica, St. Lucia and the Turks and Caicos Islands, exceeding those levels. Visitors from the US, the region’s largest source market, continued to dominate the recovery, though preliminary data suggest that US arrivals to some markets slipped y/y during the summer months. However, arrivals from the UK declined y/y curbing recovery progress relative to pre-pandemic levels, while intra-regional travel improved, but remained constrained by high air fares and inadequate connectivity. Cruise passenger arrivals also registered a strong performance during January to June on the back of tepid progress in 2022, with visitors to all markets also reaching more than 70% of 2019’s level and surpassing in The Bahamas, Dominica, St. Vincent, and Aruba. However, the absence of ship calls during the summer months in some of the southern islands limited the rebound of cruise arrivals relative to pre-pandemic levels since then. New and ongoing tourism-related and public infrastructural projects advanced construction output in most markets, while the rebound of alumina production also boosted economic growth in Jamaica. Economic expansion in Guyana sustained its robust momentum bolstered by higher production of crude oil, spillover to non-oil sectors of the economy, and substantial public investment, while greater non-energy output spawned moderate growth in Trinidad and Tobago.
Unemployment rates improved y/y in all markets for which data is available, namely Barbados, Belize, Cayman Islands, Jamaica, and Trinidad and Tobago, falling to record lows in Belize and Jamaica, specifically.
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