The Caribbean region, encompassing countries such as Jamaica, the Dominican Republic, and Trinidad and Tobago, is projected to experience economic growth in 2025. The International Monetary Fund (IMF) forecasted that Latin America and the Caribbean should focus on reforms towards growth, with the region’s growth expected to rise to 2.5% in 2025. The Caribbean banking sector is entering 2025 with a focus on digital transformation, financial inclusion and climate resilience. Tourism recovery and digital finance are driving economic activity, while sustainable finance initiatives are gaining momentum across the region. Despite these positive developments, challenges such as high public debt levels, limited financial infrastructure and vulnerability to climate change remain significant hurdles for the region’s financial stability and growth. Economic outlook and financial stability According to the IMF World Economic Outlook, the economies of Latin America and the Caribbean are forecast to grow by 2.5% in 2025, supported by tourism recovery, remittances and external investment flows. The Dominican Republic is expected to outperform the regional average with 5.0% growth, while Jamaica is projected to grow by 2.1%, driven by strong demand in the hospitality and service sectors. However, high levels of public debt—exceeding 100% of gross domestic product (GDP) in nations like Barbados and Jamaica—continue to constrain fiscal policy and government spending. Rising global interest rates have elevated borrowing costs, intensifying the debt servicing burden for these economies. Banks in the region, particularly those with significant exposure to sovereign bonds, are navigating these risks by diversifying loan portfolios and strengthening their capital buffers. Inflation across the region, though stabilising, remains a concern, particularly in countries reliant on imported energy and food. Central banks in the Caribbean are expected to maintain cautious monetary policies to manage inflation, which could temper credit growth and private sector investment. Digital transformation and financial inclusion The Caribbean is witnessing a rapid expansion of digital financial services, with mobile banking and fintech platforms transforming the delivery of financial products. The adoption of central bank digital currencies (CBDCs), such as Jamaica’s Jam-Dex and the Bahamas’ Sand Dollar, has been instrumental in increasing access to formal financial systems. These digital currencies enable seamless transactions, enhance transparency and reduce the cost of remittances, which account for over 10% of GDP in several Caribbean nations. Despite these advances, disparities in digital infrastructure across smaller island economies remain a challenge. Limited internet connectivity and high implementation costs are barriers to broader financial inclusion. Banks are collaborating with international development organisations to address these gaps by investing in digital literacy programmes and community-driven financial initiatives that target rural and underserved populations. Sustainable finance and climate resilience The Caribbean’s vulnerability to hurricanes, rising sea levels and other climate risks has accelerated the adoption of green finance initiatives. According to the IMF Global Financial Stability Report, the region’s banks are increasingly integrating sustainability-linked loans and green bond issuances into their portfolios. Total green finance volumes in the Caribbean are expected to exceed $5 billion in 2025, with funds directed toward renewable energy projects, disaster-resilient infrastructure, and coastal protection programmes. Partnerships with multilateral organisations, such as the Inter-American Development Bank (IDB) and the World Bank, have provided critical support for these efforts. These institutions are offering technical assistance and concessional financing to help Caribbean nations align their financial systems with global environmental, social and governance (ESG) standards. As a result, the region is positioning itself as a leader in sustainable finance among small and developing economies. Opportunities for regional collaboration and growth Regional collaboration through initiatives like the Caribbean Community (CARICOM) and the Caribbean Single Market and Economy (CSME) is fostering greater economic integration and financial cooperation. Harmonising regulations and payment systems across member states is expected to enhance efficiency, reduce costs and improve access to banking services for businesses and individuals. Tourism recovery remains a key growth driver for the region. As tourist arrivals surpass pre-pandemic levels, demand for foreign exchange, credit facilities and payment solutions is rising, creating opportunities for banks to expand their offerings. Additionally, the increasing use of blockchain-based platforms for remittances is reducing transaction costs and improving efficiency in cross-border financial flows. The Caribbean banking sector is at a critical juncture, with 2025 presenting both challenges and opportunities. By embracing digital transformation, sustainable finance and regional collaboration, banks in the region can drive economic growth and improve financial inclusion. However, addressing structural vulnerabilities—such as high debt levels and limited infrastructure—will be essential for long-term resilience and stability. Through prudent risk management and innovative solutions, Caribbean banks can position themselves as pivotal players in the region’s journey toward sustainable development.
