The International Monetary Fund (IMF) has concluded its 2026 regional consultation with member states of the Eastern Caribbean Currency Union, warning of moderating growth, persistent fiscal challenges, and increasing external risks across the region.
According to the IMF’s assessment, economic growth in the ECCU slowed to an estimated 2.8% in 2025, down from the strong rebound observed after the pandemic. The expansion was supported mainly by construction activity and a solid performance in tourism, although the sector is now approaching capacity limits, constraining further gains.
Looking ahead, growth is expected to decelerate further to 2.4% in 2026. The IMF attributes this slowdown to rising fuel and import costs—linked in part to geopolitical tensions in the Middle East—as well as structural constraints such as low productivity and limited fiscal space for investment.
Inflation, which had eased in line with global trends in food and energy prices, is projected to edge up to 2.2% in 2026 before stabilizing around 2% over the medium term.
Despite the region’s resilience, the IMF highlighted that public debt remains a key concern. Debt levels have stalled at approximately 75% of GDP, significantly above the ECCU’s regional target of 60% by 2035. Without additional fiscal adjustments, only about half of member countries are expected to meet this goal.
The external position also remains under pressure, with large current account deficits continuing to be financed primarily through foreign direct investment. However, the IMF noted that stable reserves and a strong currency backing ratio at the Eastern Caribbean Central Bank help sustain confidence in the monetary arrangement.
Risks to the outlook are tilted to the downside. The IMF pointed to global uncertainties, including geopolitical tensions, the possibility of sustained high oil prices, and evolving trade and travel barriers. These factors compound longstanding structural vulnerabilities such as the region’s dependence on tourism and imports, exposure to natural disasters, and reliance on Citizenship-by-Investment (CBI) inflows.
On the policy front, the IMF emphasized the need for stronger regional coordination to safeguard fiscal sustainability and enhance resilience. It called for the implementation of rules-based fiscal frameworks, improved oversight mechanisms, and more disciplined public spending.
The report also urged governments to rationalize costly tax exemptions—particularly in tourism—and to strengthen social safety nets, allowing for more targeted responses to external shocks.
In the financial sector, the IMF noted that while overall stability has been maintained, vulnerabilities persist. These include legacy weaknesses in bank balance sheets and gaps in the supervision of non-bank financial institutions. Strengthening regulatory frameworks and accelerating the resolution of non-performing loans were identified as key priorities.
Finally, the IMF stressed that accelerating structural reforms will be critical to boosting long-term growth. Enhancing regional integration, improving labor mobility, investing in human capital, and modernizing trade and regulatory frameworks were highlighted as essential steps to increase productivity and economic resilience.
The consultation underscores that while the ECCU continues to benefit from a strong monetary framework, decisive policy action will be necessary to navigate an increasingly complex global environment and secure sustainable growth.