One Month of War: Caribbean Tallies the Commodity Toll as Tourism Surges — April 2022

Publication Date: 3 April 2022  |  Coverage Period: 3 March – 2 April 2022

Morning Briefing

• Oil prices reached $130 per barrel in early March 2022 as the Russia-Ukraine conflict intensified and Western governments announced further sanctions on Russian energy, before retreating to the $100–110 range by month-end — still deeply elevated for Caribbean import-dependent economies.
• Caribbean airlines began imposing fuel surcharges on ticket prices in March 2022, with Caribbean Airlines announcing a temporary fuel surcharge on regional routes in response to the extraordinary surge in jet fuel costs driven by Russia-Ukraine commodity market disruption.
• Jamaica’s government convened an emergency economic committee to assess the impact of fuel and food price inflation on vulnerable households, with the Finance Ministry indicating that the 2022-23 budget would need to incorporate additional allocation for energy cost mitigation measures.
• Caribbean summer tourism bookings surged to record levels, with Jamaica, Barbados, the Dominican Republic, and St Lucia all reporting forward bookings for June–August 2022 running significantly ahead of any comparable summer in recent history, driven by pent-up post-pandemic demand.
• The US Federal Reserve raised its benchmark rate by 25 basis points at its March 2022 meeting, beginning the most aggressive US rate tightening cycle in decades, with Caribbean mortgage markets beginning to price in the implications for borrowing costs over the coming 12–18 months.
• Caribbean construction costs continued their upward trajectory through March, with several contractors across Jamaica and Barbados reporting project delays and cost overruns as steel and cement prices hit new highs compounded by the Russia-Ukraine commodity shock.

One Month of War: The Caribbean’s Running Energy Cost Tab

Russia’s invasion of Ukraine, which entered its second month during this coverage period, has settled into a grim and extended conflict with no clear diplomatic resolution on the horizon. For the Caribbean, the relevant calculation is not the military outcome but the commodity price trajectory: oil reaching $130 per barrel, natural gas prices at multi-decade highs in European markets, wheat futures surging, and fertiliser costs spiking in ways that affect the cost of locally grown food as well as imported agricultural commodities.

The headline oil price spike to $130 per barrel in early March was the most acute single data point of the month. For context, Caribbean power generation utilities and national oil companies typically price their import forecasts on assumptions of $60–80 per barrel in their budget projections. The gap between those planning assumptions and the actual market price represents a direct fiscal cost that must be absorbed either through government subsidy, tariff pass-through to consumers, or a combination of both. Every Caribbean finance ministry is wrestling with this calculation in real time.

Jamaica’s response has been measured but consequential. The government announced a package of targeted support measures for vulnerable households, including an expansion of the Programme of Advancement Through Health and Education (PATH) cash transfers and a temporary reduction in petroleum product import duties to cushion the pass-through of international fuel prices to domestic consumers. The Finance Ministry has indicated that these measures will require additional budgetary provision in the 2022-23 estimates, at a time when the government was hoping to accelerate fiscal consolidation after the pandemic-era pause.

Barbados, operating under its IMF Extended Fund Facility programme, faces a more constrained fiscal response capability. The government of Prime Minister Mottley has been maintaining the fiscal discipline required by the IMF programme, which limits the scope for large unbudgeted spending to cushion energy price impacts. Instead, Barbados has focused on targeted measures for the most vulnerable households through its social protection system and has accelerated discussions with the IDB and CDB about concessional financing for energy import cost relief. The Barbados central bank governor indicated in late March that the country’s foreign exchange reserves remain adequate, providing a buffer against the current account deterioration that elevated energy import costs are causing.

Tourism Boom: Summer 2022 Bookings at Record Levels

Against the grim backdrop of commodity price shock, the Caribbean tourism industry is generating its most encouraging demand data since the pandemic began. Summer 2022 bookings — for the June through August period that represents the Caribbean’s second-most-important tourism season after the winter — are running at levels that, by multiple accounts, represent the strongest forward booking position the industry has ever recorded for a Caribbean summer season.

The drivers are well understood and have been building for some time. Two years of pandemic-suppressed travel demand are generating an extraordinary wave of pent-up interest that is now translating into actual bookings as COVID restrictions have been lifted across virtually all Caribbean destinations and all major source markets. The summer of 2022 is shaping up to be the first truly post-pandemic Caribbean summer — the first since 2019 where travellers can book, fly, arrive, and enjoy without testing requirements, quarantine protocols, or health certificates interfering with the experience.

Jamaica’s Tourism Ministry reported that June and July 2022 hotel inventory is already significantly sold out at many properties in Montego Bay and Ocho Rios, with occupancy projections for the summer peak running ahead of any comparable pre-pandemic summer. Airlines have responded by restoring and in some cases expanding Caribbean capacity: American, Delta, JetBlue, and Air Canada have all announced additional frequencies on Caribbean routes for the summer season. The Caribbean Airlines regional network is also scaling up, though the fuel surcharge announcement has added a modest friction element to regional connectivity costs.

Barbados and St Lucia — which depend heavily on the UK and European markets — are reporting particularly strong early summer bookings as British travellers, finally free of all COVID-related travel requirements that the UK government dropped in February 2022, are booking Caribbean holidays in exceptional numbers. The volume of UK outbound Caribbean bookings for summer 2022 is reported to be running 30–40% ahead of summer 2019 in some categories, a remarkable reversal from the near-zero travel of 2020 and the fitful recovery of 2021.

Caribbean Property Market: Demand Robust, Supply Under Pressure

The Caribbean property market through March 2022 reflects the push and pull of two powerful and contradictory forces. On the demand side, the drivers that have been building since late 2020 remain robustly intact: diaspora buyers, digital nomad purchasers, luxury second-home investors, and domestic first-time buyers supported by government mortgage programmes are all generating sustained transaction activity. On the supply side, construction cost inflation — already severe before the Russia-Ukraine shock — has been pushed to new extremes, constraining the delivery of new supply across all market segments.

Jamaica’s NHT mortgage data for the first quarter of 2022 shows application volumes comfortably above the same period in 2021, reflecting continued strong domestic demand for homeownership. The rising BOJ policy rate has begun to feed through to commercial bank mortgage products, but the effect thus far has been modest — commercial bank mortgage rates in Jamaica remain at levels that are historically supportive of first-time buyer activity, and the NHT’s subsidised rate products continue to provide an affordable pathway for qualifying lower-income buyers.

At the luxury end, Jamaica’s market in the tourism corridors is performing exceptionally well. Several major villa developments in the Rose Hall area east of Montego Bay have launched new phases and reported strong off-plan sales, with North American buyers — attracted by Jamaica’s summer tourism boom anticipation and the island’s improved air connectivity — representing a significant share of purchasers. The rental income potential of well-located villas, with summer 2022 short-term rental rates running substantially above 2019 levels, is providing a compelling investment thesis for income-oriented buyers.

In the Dominican Republic, the real estate market’s consistently strong performance continued through March. Cap Cana reported another month of elevated sales activity, with branded residence launches continuing to attract strong demand from US and Canadian buyers. The DR’s property market is now generating international attention from institutional investors who had previously focused exclusively on primary markets — a sign of the market’s increasing depth and liquidity.

Food and Fertiliser: The Agricultural Crisis Dimension

While the fuel price impact of the Russia-Ukraine war has dominated headlines, the food and agricultural dimension of the crisis deserves equal attention from Caribbean policymakers. The disruption to Ukrainian grain exports — Ukraine is the world’s fifth-largest wheat exporter and the leading global exporter of sunflower oil — combined with the impact of sanctions on Russian fertiliser and agricultural chemical exports, is driving a food price inflation crisis that is being transmitted directly to Caribbean household budgets.

Caribbean nations import a high proportion of their food requirements — the Caribbean Development Bank has estimated that food import dependence across the region ranges from 50% to as high as 80% of total food consumption in the smallest island states. This import dependency means that global food commodity price shocks translate rapidly and completely into domestic retail price increases, disproportionately affecting lower-income households that spend a higher share of their budgets on food.

Regional agricultural authorities and the Caribbean Community Secretariat have begun discussing coordinated responses, including acceleration of regional food production initiatives and joint procurement arrangements that might provide some bargaining power in global commodity markets. CARICOM’s agricultural working group has convened an emergency session to assess food security scenarios for the most vulnerable member states. The recommendations are expected to focus on expanded local food production incentives, import diversification, and strategic food reserves — none of which provide immediate relief but could build resilience over a medium-term horizon.

Caribbean Leaders This Month

Jamaica leads this month’s performance assessment on the strength of its extraordinary summer tourism booking position combined with solid property market activity. The government’s measured response to energy cost pressures — targeted household relief without compromising the fiscal framework — demonstrates institutional maturity.

Dominican Republic maintains its position as the Caribbean’s most consistently performing real estate market, with Cap Cana sales and tourism bookings both running ahead of expectations. The DR’s scale and diversification provide meaningful buffer against the commodity price shock that is hitting smaller island neighbours harder.

Guyana is in the enviable position of recording revenue windfalls as oil prices remain elevated. The government’s ability to fund its ambitious housing and infrastructure programme from oil receipts that are exceeding budget assumptions provides a significant advantage over regional peers facing commodity price-driven fiscal strain.

Trinidad and Tobago similarly benefits from elevated energy revenues, though the government faces domestic political pressure to deploy windfall LNG and oil revenues for immediate household relief rather than long-term investment and fiscal consolidation.

Barbados is navigating the energy cost challenge within its IMF programme constraints, demonstrating fiscal discipline that may cause short-term household pain but positions the island for longer-term macro stability.

St Lucia reports exceptional summer tourism bookings particularly from the UK market, with its luxury resort sector benefiting from the release of pent-up demand from British travellers now free of all COVID travel requirements.

Antigua and Barbuda is capitalising on its Citizenship by Investment programme’s continued strength, with property-linked CBI applications generating investment into the island’s approved hotel and residential developments.

Overall Performer of the Month: Jamaica. The combination of record summer booking data, solid NHT mortgage volumes, luxury property market momentum, and competent macro management of the commodity price shock makes Jamaica the standout performer for this coverage period.

Looking Ahead

April and May represent the shoulder season between the winter peak and the summer surge, and the question is whether the extraordinary summer booking data will translate into equally strong actual arrivals. The removal of virtually all COVID-related travel friction across the Caribbean and in major source markets is the critical enabler, and the current trajectory strongly suggests that summer 2022 will be a watershed moment for the region’s tourism recovery.

The commodity price outlook remains highly uncertain. Oil prices have retreated from the $130 peak but remain elevated, and the trajectory will depend on how the Russia-Ukraine conflict evolves, what additional sanctions Western governments impose on Russian energy, and whether alternative supply sources can be mobilised quickly enough to prevent sustained market tightness. Caribbean finance ministries will be managing their budgets on multiple scenarios for the remainder of the fiscal year.

The Fed rate tightening cycle is now underway, and Caribbean central banks will need to navigate the implications for their own monetary policy settings. The Bank of Jamaica has already moved proactively. The Eastern Caribbean Central Bank and the Barbados central bank will be monitoring closely whether the Fed’s tightening pace requires adjustments to their own frameworks. The cumulative impact on Caribbean mortgage affordability as the rate cycle unfolds through 2022 will be one of the defining forces shaping property market performance in the second half of the year.

The Caribbean Property & Investment Review is published monthly and covers developments during the preceding calendar month. All factual statements reflect information publicly available at the time of publication.