WASHINGTON, D.C. — AS global economic storms gather, the International Monetary Fund (IMF) is warning Caribbean nations to brace for potential shocks, particularly within the region’s vital tourism sector.
Much of the current global instability stems from the escalating trade war launched by U.S. President Donald Trump, which has rippled through international markets and affected regions heavily reliant on tourism, such as the Caribbean.
“It’s very important to keep the macroeconomy as stable as possible,” Rodrigo Valdez, Head of the IMF’s Western Hemisphere Department, told reporters in Washington. “Countries that still have a lot of homework in terms of rebuilding fiscal space must continue doing it. The risk of not doing so is facing a disorderly macroeconomy — and that, at the end of the day, is much worse.”
Valdez’s warning is particularly resonant for economies like St. Kitts and Nevis, which remain heavily dependent on tourism. Fears are rising that a potential U.S. recession could sharply impact visitor arrivals and economic stability across the region.
Despite growing concerns, early tourism data offers a glimmer of hope. The IMF noted that current bookings show little evidence of widespread cancellations. Many travelers book months in advance, and so far, reservation levels remain steady. However, officials cautioned that conditions could deteriorate quickly.
Timothy Antoine, Governor of the Eastern Caribbean Central Bank (ECCB), shared similar sentiments with SKNVibes on the sidelines of the IMF and World Bank Spring Meetings in Washington, D.C.
Meanwhile, Camillo Gonsalves, Finance Minister of St. Vincent and the Grenadines, highlighted the growing challenges facing the Caribbean. He pointed to the IMF’s latest World Economic Outlook, which raised the probability of a global recession this year from 25 percent to 40 percent.
Speaking to SKNVibes News, Gonsalves noted that uncertainty surrounding U.S. tariffs and trade policy continues to weigh heavily on the global economy — and, by extension, the Caribbean tourism sector.
“So, we are very much in flux,” Gonsalves said. “St. Vincent and the Grenadines, like many tourism-dependent countries, is heavily reliant on U.S. tourism. There’s a strong correlation between U.S. recessions and negative impacts in the region. In St. Vincent and the Grenadines, a one percent increase in U.S. inflation translates into roughly a half-percent decline in our tourism sector.”
Acknowledging the risks, Gonsalves emphasized the need for greater diversification.
“We're very, very concerned,” he said. “We are trying to expand our tourism base, attracting visitors from regions beyond the U.S. Currently, about 50 percent of our tourists come from the United States. We’re working to reduce that dependence.”
Beyond tourism, concerns also linger over the potential impact on the Eastern Caribbean dollar, which is pegged to the U.S. dollar. Asked whether the currency peg was at risk, Valdez offered reassurance, noting that the Eastern Caribbean Currency Union (ECCU) maintains a strong reserves-to-circulation ratio.
On the broader issue of climate change, Valdez reiterated the IMF’s growing focus on the region’s vulnerabilities. Echoing Managing Director Kristalina Georgieva, he called natural disasters “macrocritical” and urged Caribbean governments to prioritize resilient financing and infrastructure planning.
“It’s important to build a structure of financing and infrastructure to confront these challenges effectively,” Valdez said. “And we are committed to working with countries to achieve that.”
