World Bank Says Caribbean Countries Need to Diversify to Boost Econmic Growth

BRIDGETOWN, Barbados – The World Bank Wednesday said that economic growth in the Caribbean this year will be 1.9 per cent increasing to a “modest recovery” of 2.6 per cent” in 2025.

World Bank´s Chief Economist for Latin America and the Caribbean, William Maloney, speaking at a virtual new conference on Wednesday (CMC Photo)The World Bank´s Chief Economist for Latin America and the Caribbean, William Maloney, speaking at a virtual new conference, where the Washington-based financial institution presented its economic review titled “Taxing Wealth for Equity and Growth,” said Guyana will continue to lead the economic progress in the region.

Asked by the Caribbean Media Corporation (CMC) what are the pitfalls the Caribbean region could encounter in the new year, Maloney said they need to diversify “to the better use in the case of countries that are exporting trained labour to the United States and to other areas to make those more sustainable models of development rather than treating them as brain drain.

“It is something I think we need to be thinking about and I think also to the degree that we can develop sources of renewable energy, so we are less dependent on energy that would both help us fight inflation…and make us more independent”.

The World Bank report examines the economic prospects of the region, focusing on growth and fiscal balance, with Maloney discussing the role of wealth taxes in creating fiscal space and promoting equity and growth.

He said Guyana “clearly has a bright future in terms of revenue coming from petroleum and I think the challenge is going to be to use those revenues correctly in such a way that we don’t drive over valuation of the currency and drive inflation within the country”.

He said that means having a “well run and independent Sovereign Wealth Fund,” adding “I think that’s going to be a big challenge going forward.

“I know that the World  Bank is working with Guyana to ensure that the development of these oil investments are environmentally friendly,” he added.

According to the World Bank, Latin America and the Caribbean (LAC) must capitalize on economic momentum to boost growth and that the region’s growth of 1.9 per cent, slightly exceeding previous estimates.

In 2025, the region is forecast to grow 2.6 percent. These are the lowest rates among all global regions, highlighting persistent structural bottlenecks.

According to the World Bank figures, Barbados is likely to have growth of 3.9 per cent this year, increasing to 2.8 next year and 2.3 per cent in 2026.

Belize is expected to register 4.3 per cent growth this year, dropping to 1.2 per cent next year and 0.5 per cent in 2026, while Dominica’s growth will be 4.6 per cent this year, declining slightly to 4.2 per cent next year and 3.2 per cent the following year.

In the case of Grenada, the World Bank is estimating growth of 3.2 per cent this year, improving to 4.7 per cent in 2025 and 4.4 per cent the following year.

Guyana’s economic growth for this year is estimated at 43 per cent, declining to 12.3 per cent next year and increasing to 15.7 per cent on 2028. Haiti, which is gripped with a political and security situation, will register minus 4.2 per cent growth this year, 0.5 per cent the following year and increasing to 1.5 per cent in 2026.

Jamaica will have economic growth of 0.8 per cent this year, with the World Bank noting that the growth in 2025 will be 2.2 per cent and 1,6 per cent in 2026.

St. Lucia’s economic growth this year is pegged at 3.4 per cent, declining to 2.6 [er cent the following year and 2.3 per cent in 2026, while St. Vincent and the Grenadines will have growth of five per cent this yea, declining to3.5 and 2.9 over the following two years.

The Dutch-speaking Caribbean Community (CARICOM) country of Suriname, will have economic growth of 2.9 per cent this year, increasing to three per cent and 3.1 per cent over the next two years.

The oil-rich Trinidad and Tobago, according to the World Bank will register growth of 2.2 per cent this year, increasing slightly to 2.3 per cent the following year before declining to 0.9 per cent in 2026.

In its report, the World Bank said that to accelerate growth, the LAC region must seize the current momentum, noting that the United States Federal Reserve’s decision to lower interest rates is expected to provide some relief.

Inflation control is another positive development, thanks to the region’s effective macroeconomic management.

“The region has made strides in managing inflation and stabilizing its macroeconomic environment,” said Carlos Felipe Jaramillo, World Bank Vice President for Latin America and the Caribbean.

“This is a crucial moment to leverage these achievements to attract the investments necessary for sustainable development, foster innovation, build human capital, create more and better jobs, and empower the region to break free from this low-growth cycle,” he added.

The report highlights that both public and private investments in LAC remain low, and the region is not fully capitalizing on nearshoring opportunities.

It said foreign direct investment (FDI) levels are below those of 13 years ago in real terms, with greenfield investment announcements favouring other regions.

Despite competitive wages compared to China and other destinations, high capital costs, weak education systems, poor energy and infrastructure, and social instability reduce LAC’s attractiveness as a nearshoring destination.

“Seizing LAC’s major windows of opportunity, the green transition and the nearshoring movement, requires structural reforms across the board to make the region more productive and competitive,” said Maloney.

“This will require generating more fiscal space, improving government efficacy, as well as reducing the tax burden on the productive sectors. This is a good time for the region to reconsider how its tax systems can best generate revenue while stimulating growth and advancing equity,” Maloney said.

According to the report, the debt-to-GDP ratio rose to 62.8 per cent in 2024, up from 59.1 per cent in 2019, and high debt levels and servicing costs continue to hinder the region’s ability to create fiscal space for public spending and investment.

It said closing this gap is part of a broader development agenda, including improvements in administrative capacity, spending, and revenue collection.

The report looks at different options countries can explore in this context and takes a deeper dive on wealth taxes to generate fiscal space, equalize incomes, and stimulate growth. Currently, the LAC has some of the highest statutory corporate taxes globally, averaging 24.7 per cent, which is higher than the OECD average of 23.9 percent and Asia’s 19 percent. However, LAC collects only 2.7 per cent of its revenues from wealth taxes, compared to 12.8 per cent in North America and 4.3 per cent in Western and Central Europe.

The World Bank said that revisiting property taxes also has an important equity component.

It noted that the root of the property tax paradox in LAC lies not in the tax rates themselves, but in outdated and inaccurate property valuations that are sometimes less than 10 per cent of market valuations.

“This leads to undervaluation, lower tax bills for landowners, and possible regressivity. Presumptive taxes, based on proxies like size, location, and property type, are often used to generate revenue, but they can also be inaccurate and inequitable.

“To address these challenges, LAC governments need to enhance their fiscal valuation systems, employing new digital platforms and modernizing cadasters to improve property mapping, data collection, and data sharing,” the World Bank said.