Prospects for Growth and Construction Costs in the Caribbean.

The global economy is currently facing various challenges, including high inflation rates not seen in decades, tightening financial conditions across multiple regions, Russia’s invasion of Ukraine, and the lingering impact of the COVID-19 pandemic.

Despite these challenges, the Caribbean region is well-positioned for robust economic growth in the future. The region had a projected growth rate of 7.3% in 2022, with a slightly lower rate of 5.9% anticipated for 2023. Much of this growth is attributed to the significant contribution of Guyana’s offshore oil production and the early reopening of borders in certain areas, such as the Dominican Republic, which has already surpassed pre-pandemic levels for stay-over arrivals. As the entire region reopens for tourism and the cruise industry returns to full capacity, growth is expected to accelerate, fuelled by pent-up demand from North American feeder markets.

However, the construction industry in the Caribbean has experienced unprecedented cost increases since the onset of the pandemic. Research shows an average increase in construction costs of 19.22% for the fourteen jurisdictions surveyed for the two years since our last market study in 2020. This increase is due to the rising costs of materials and shipping, which have significantly contributed to the region’s construction costs. The most significant increase occurred in Anguilla, reflecting the 13% Goods and Services Tax (GST) introduced in July 2022 and the amount of ongoing construction activity in that jurisdiction.

While the construction industry has generally remained aggressive and competitive, profit margins have increased in three jurisdictions, remained static in ten, and decreased in one. Aruba reported a single-digit margin of 7.5%, while Anguilla, the Bahamas and St. Lucia led the way with reported margins of 15%, 15% and 17.5%, respectively. The remaining ten jurisdictions reported margins of between 10 and 12%. As a result, the overall average profit margin for the fourteen jurisdictions surveyed is 11.36%.

In conclusion, whilst the Caribbean region continues to deal with the aftermath of the COVID-19 global pandemic, increasing interest rates and high inflation, the outlook is not all doom and gloom.

Travel and tourism, the most significant single contributor to GDP in the region, has rebounded strongly from the lows of 2020, with the three KPIs, occupancy, average daily rate, and revenue per available room, all posting unprecedented year-on-year growth in 2021 and 2022 and are close to surpassing the highs of 2019.

Source of data: Caribbean and Latin America Construction Market Trend Report, 2022-23