Caribbean 2022 in Review: From Inflation Shock to Tourism Rebound — 2023 Outlook — January 2023

Publication Date: 3 January 2023  |  Coverage Period: 3 December 2022 – 2 January 2023

Morning Briefing

• Caribbean tourism 2022 closes at near-record levels: The Caribbean Tourism Organisation estimates that 2022 full-year visitor arrivals reached approximately 85% of 2019 peak levels across the region, with several destinations — including Jamaica, Barbados and the Dominican Republic — reporting full recovery or new records.
• Guyana oil production hits 300,000 bpd milestone: ExxonMobil and its Stabroek Block partners reported that Guyana’s offshore oil production reached approximately 300,000 barrels per day in December 2022, up from around 200,000 bpd at the start of the year, generating transformative fiscal revenues for the country.
• Jamaica GDP growth 4.5% in 2022: Preliminary estimates from the Planning Institute of Jamaica indicated GDP growth of approximately 4.5% for 2022, driven by tourism recovery, strong remittances and construction activity, though the figure is moderated by inflation and supply chain pressures.
• Post-Fiona reconstruction costs mount across region: Updated damage and loss assessments from Hurricane Fiona, which struck Puerto Rico and the Dominican Republic in September 2022, put total economic losses at over US$3 billion across all affected territories, with reconstruction expected to extend well into 2024.
• Caribbean construction costs end 2022 at historic highs: Building material price indices across CARICOM states ended 2022 approximately 35–45% above December 2020 levels, as the combined effects of pandemic supply chain disruption and energy price inflation from the Ukraine war drove extraordinary cost increases.
• 2023 Caribbean investment outlook cautiously positive: Regional economic analysts and development bank forecasters are projecting Caribbean GDP growth of 3–4% for 2023, contingent on continued tourism strength, inflation moderation and the absence of a major new hurricane event.

2022 in Review: The Year That Tested Caribbean Resilience

Reflecting on 2022 from the vantage point of early January 2023, the year that has just closed stands as one of the most turbulent in Caribbean economic history since the 2008–2009 global financial crisis. Three defining events shaped the year: Russia’s invasion of Ukraine on 24 February, Hurricane Fiona’s devastating strike on Puerto Rico and the Dominican Republic in September, and the sustained surge in global interest rates as central banks worldwide moved aggressively to combat inflation. Against this backdrop, the Caribbean’s resilience — particularly in its tourism and property markets — has been more impressive than most observers would have predicted at the start of 2022.

The Ukraine war’s economic reverberations reached the Caribbean quickly and powerfully. Russia and Ukraine together account for approximately 30% of global wheat exports and a substantial share of sunflower oil production. As war disrupted supply chains and commodity markets responded with immediate price spikes, Caribbean food import bills surged dramatically. For island economies that import the majority of their basic food basket, the war translated directly into double-digit food price inflation that persisted through the year. Energy prices followed a similar trajectory: the Brent crude oil price spiked above US$120 per barrel in June 2022, driving fuel costs across the Caribbean to levels not seen in a decade and adding substantially to transportation and construction costs.

Hurricane Fiona, which made landfall in Puerto Rico on 18 September 2022 as a powerful Category 1 storm and then struck the Dominican Republic’s southwest coast on 19 September, was the Caribbean’s most significant natural disaster event of the year. Puerto Rico, still bearing the scars of 2017’s Hurricane Maria, suffered extensive flooding and power outages that took weeks to restore. The Dominican Republic’s southwestern provinces — among the country’s most economically vulnerable areas — experienced severe infrastructure damage. The storm later struck Nova Scotia, Canada on 24 September, demonstrating the extraordinary geographic reach of major Atlantic hurricanes. Total economic losses across all affected territories exceeded US$3 billion.

Yet against these headwinds, Caribbean tourism not only recovered but surpassed expectations. The post-pandemic release of pent-up travel demand — the so-called “revenge travel” phenomenon — proved more powerful and more sustained than most analysts predicted. Caribbean destinations that were fully open to international visitors by early 2022 saw extraordinary demand from North American and European visitors who had spent two years unable to travel and were determined to prioritise vacation experiences despite inflation squeezing household budgets elsewhere. The result was a tourism year that approached and in some cases exceeded 2019 records despite the broader economic turbulence.

Property Market 2022: The Tale of Two Markets

The Caribbean property market in 2022 exhibited a striking bifurcation that will define thinking about the sector for years to come. The luxury and tourism-linked segments — villa markets in Barbados, Cayman and St Lucia; resort communities in the Dominican Republic; branded residences in Jamaica’s north coast — experienced extraordinary demand and strong price appreciation, driven by tourism recovery, remote-working migration and diaspora investment. The affordable and middle-market segments, by contrast, faced crushing headwinds from rising construction costs, soaring mortgage rates and declining real household incomes.

In the luxury segment, 2022 was a year of record-breaking transactions. Barbados’s west coast saw several sales in excess of US$5 million, with branded property developments tied to international hotel chains reporting strong pre-sale activity on new projects. The Cayman Islands sustained its position as the region’s most expensive market on a per-square-foot basis, with demand from financial sector professionals and the island’s limited land supply ensuring that values held firm even as global rates rose. In the Dominican Republic, Cap Cana and Punta Cana projects continued to attract international investment at remarkable pace, with branded residential units selling well into the multi-million dollar range.

The affordable market picture was starker. Construction cost inflation of 35–45% above pre-pandemic levels meant that developers who began projects in 2020–2021 at one price point found their costs had escalated dramatically by the time projects neared completion in 2022. The response in many cases was price increases that translated construction cost inflation directly into purchase price increases, pricing existing buyers out of contracts they had signed years earlier and making new projects financially inaccessible to the target market of middle-income Caribbean households. Jamaica’s NHT and equivalent institutions across the region served as a partial buffer, but the scale of the affordability gap significantly exceeded the capacity of these schemes.

Guyana’s Oil Revolution: A Caribbean Economic Transformation

Among the most significant Caribbean economic stories of 2022 — one that will have ramifications for years and decades to come — is the extraordinary acceleration of Guyana’s oil production under the ExxonMobil-led Stabroek Block consortium. Production growth from approximately 200,000 barrels per day at the start of 2022 to around 300,000 bpd by year-end represents one of the fastest ramp-ups of a new offshore oil province in global energy history. The fiscal revenues generated — flowing into the Natural Resource Fund and through government expenditure — are transforming the Guyanese economy and creating conditions for property market growth that have no parallel elsewhere in the Caribbean.

Georgetown’s commercial real estate market ended 2022 with office rents substantially above their pre-oil-boom levels, driven by the office space requirements of energy companies, contractors, professional services firms and government agencies all expanding simultaneously. Residential property in the capital and its eastern suburbs has seen price increases that are extraordinary by Caribbean standards: homes that were valued at US$200,000–300,000 in 2019 are in many cases now being offered at US$400,000–600,000, a price inflation driven not by luxury demand but by the sheer purchasing power that oil sector incomes are injecting into the local economy. The Guyanese government is aware of the risks of a two-speed economy and has programmes aimed at distributing oil revenues more broadly, but the infrastructure build-out needed to support sustainable urbanisation is lagging significantly behind demand.

2023 Investment Outlook: Cautious Optimism

Looking ahead to 2023, the Caribbean property and investment landscape is one of cautious optimism tempered by significant uncertainty. The base case for 2023 — shared broadly by the IDB, CDB and regional central banks — is GDP growth of 3–4% across most Caribbean economies, supported by continued tourism strength, moderated inflation and ongoing reconstruction investment. This would represent a solid foundation for property market stability.

The key risks to this base case are well understood. On the downside, a US recession — which remains a possibility given the aggressive pace of Fed rate increases — would reduce tourist volumes and diaspora remittances simultaneously, the two pillars of Caribbean economic resilience. A major hurricane in the 2023 season would set back reconstruction efforts and damage the infrastructure on which tourism depends. A prolonged period of high global interest rates would continue to squeeze Caribbean housing affordability and potentially trigger a correction in property values in markets that have seen significant appreciation.

On the upside, the structural drivers of Caribbean tourism appear more durable than cyclical. Wealthy travellers in North America and Europe are demonstrating that Caribbean beach tourism is close to the top of their discretionary spending hierarchy, and this preference is being reinforced by the growing integration of the Caribbean into remote-working lifestyles. Guyana’s oil production will continue to grow in 2023, potentially reaching 400,000 bpd by year-end if development progresses on schedule, further expanding that country’s economic base and investment appeal. And the moderation of global inflation, if it continues, will gradually improve Caribbean construction economics and household purchasing power over the course of the year.

Caribbean Leaders This Month

Jamaica closes 2022 with estimated GDP growth of 4.5%, driven by tourism recovery and construction, and enters 2023 with a tourism sector operating at or above pre-pandemic levels and the NHT providing critical housing support. The island’s economic management has been commendable given the external headwinds.

Guyana is the undisputed Caribbean growth story of 2022, with oil production doubling from the start to end of the year and fiscal revenues generating investment capacity unmatched anywhere else in the region. The property market is at the epicentre of an economic transformation that is both exciting and challenging to manage.

Dominican Republic demonstrated that large, diverse Caribbean economies can absorb significant shocks — including a direct hurricane hit — while maintaining positive growth momentum. Construction activity and tourism investment continued through Fiona’s aftermath, and the reconstruction of affected southwestern areas is proceeding with government commitment.

Barbados ends 2022 with its IMF programme on track, inflation declining toward target, and luxury tourism and property performing exceptionally well. PM Mottley’s Bridgetown Initiative has elevated Barbados’s international profile significantly, positioning the island as a thought leader on climate finance beyond its scale.

Trinidad and Tobago benefited from elevated energy prices through much of 2022, with LNG and natural gas revenues providing fiscal comfort that shielded the country from some of the worst external shocks. The HDC housing programme continues to be the most substantive affordable housing delivery mechanism in the region.

St Lucia recorded its strongest post-COVID tourism year in 2022, with the island’s premium product attracting high-spending visitors and generating excellent occupancy metrics that support the villa and short-term rental investment market.

Antigua and Barbuda saw its Citizenship by Investment programme continue to generate significant foreign exchange and real estate investment flows, with approved real estate projects maintaining strong marketing pipelines despite the global economic uncertainty.

Cayman Islands ended 2022 with property values at record levels, underpinned by financial sector employment and the island’s unique combination of zero income tax, political stability and world-class infrastructure.

Overall regional performer for 2022: Guyana, whose oil-driven economic transformation represents the most significant structural change to the Caribbean economic landscape in a generation, with implications for the entire region’s investment profile.

Looking Ahead

The Caribbean enters 2023 in a better position than many feared when Russia invaded Ukraine and inflation began its extraordinary surge in early 2022. Tourism has proved resilient, oil revenues are transformative for Guyana, and property markets — though bifurcated — have avoided the sharp correction that rising rates might have been expected to trigger. The region has demonstrated that its fundamentals — sun, sea, political stability, English and Spanish-language accessibility — remain powerful attractors of both tourists and investors.

The challenges ahead are substantial. Inflation has moderated but not been vanquished, and food prices in particular remain extremely elevated for Caribbean households. Housing affordability has deteriorated sharply and the waiting lists for affordable schemes are longer than they have been in years. Post-Fiona reconstruction will consume significant resources and policy attention across the Dominican Republic and Puerto Rico through 2023. And the 2023 Atlantic hurricane season — which will begin in June — represents the ever-present climate risk that any Caribbean property investor must price into their investment calculus.

For property investors, the key themes to watch in 2023 are: whether inflation moderation allows central banks to pause or reverse rate increases; whether Guyana’s oil revenues create spillover investment opportunities across the wider region; how the Dominican Republic’s reconstruction shapes the southwest property market; and whether Caribbean luxury tourism can sustain 2022’s extraordinary performance through another full year. The answers to these questions will determine whether 2023 is the year Caribbean property markets complete their post-pandemic recovery or enter a period of consolidation.

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.