The Eastern Caribbean Currency Union (ECCU) continues to serve as a stabilizing force for macroeconomic performance in a region highly exposed to shocks. Post-pandemic growth has been supported by tourism and construction, while inflation has moderated in line with global trends. Over the medium term, ECCU economies are projected to converge toward modest pre-pandemic growth levels, though downside risks dominate amid global uncertainty. Policies should focus on stronger fiscal sustainability and accountability, measures to bolster financial system resilience, and structural reforms to enhance trade connectivity, competitiveness, and investment capacity.
The ECCU region experienced robust post-pandemic expansion, with estimated growth of 3.0 percent in 2025 driven by tourism and infrastructure investment. Inflation has remained moderate, with limited impact from shifts in U.S. trade policies. However, fiscal outcomes lagged economic performance, with union-wide public debt reduction stalling. Several members are at risk of missing the 60 percent of GDP regional debt target by 2035. The financial system remains broadly stable, though legacy bank balance-sheet weaknesses and nonbank sector vulnerabilities persist. The region’s external position is weaker than fundamentals suggest, with reliance on foreign direct investment to finance elevated current account deficits, though the ECCB’s reserves and currency-backing ratio remain stable, supporting confidence in the union.
Looking ahead, regional economic momentum is expected to moderate, with average growth slowing to around 2½ percent over the medium term. This reflects tourism operating near capacity, productivity constraints, adverse demographic trends, and limited fiscal space. Downside risks include trade and travel barriers, geopolitical tensions, high public debt, reliance on Citizenship-by-Investment inflows, and vulnerability to natural disasters, which underscore the ECCU’s structural fragility.
Enhancing fiscal frameworks and policy coordination remains critical. Progress in debt reduction has been uneven, and union-wide attainment of the 60 percent GDP debt target is at risk. Most ECCU members have yet to operationalize national fiscal frameworks aligned with the regional debt target. Strengthening union-wide fiscal rules, peer reviews, public accountability, and technical capacity would support sustained debt reduction and resilience. Centralizing fiscal accountability, funding, and risk-contingency mechanisms over time, along with pooled financing and regional stabilization funds, could further safeguard fiscal continuity.
Financial system resilience and intermediation also require attention. Banks meet regulatory requirements, but the system-wide ratio of non-performing loans (NPLs) exceeds benchmarks, necessitating full provisioning, write-offs, and participation in the Eastern Caribbean Asset Management Corporation. Basel II/III implementation, harmonized insolvency frameworks, and strengthened oversight of the nonbank sector, including credit unions, are priorities. Sustainable credit growth should be supported through regional credit bureaus, microfinance programs, and financial literacy initiatives, while prudential measures may be needed in high-risk sectors.
Long-term growth potential is constrained by productivity, human and physical capital limitations, and structural inefficiencies. Expanding trade integration can diversify risks and reduce costs, but connectivity constraints currently limit potential. Policy coordination should improve institutional efficiency, harmonize customs procedures, and explore strategic investment in shipping and airlift capacity. Strengthening human and physical capital, addressing skills gaps, facilitating labor mobility, and pooling investment resources can help overcome small-market constraints. Transparent and accountable management of Citizenship-by-Investment programs offers both fiscal benefits and safeguards.
Finally, strengthening data provision is essential for effective surveillance. Persistent gaps in national accounts, external sector statistics, and fiscal data limit the accuracy of regional assessments. Greater centralization, shared platforms, inter-agency cooperation, and transparency in Citizenship-by-Investment flows would improve data quality and support evidence-based policymaking.
The IMF team expressed appreciation for the authorities and private sector counterparts for their hospitality and constructive discussions, emphasizing the need for continued collaboration to support sustainable growth, financial stability, and resilience across the ECCU.
