IMF Staff Concludes 2022 Virtual Staff Visit to Grenada

IMF News, January 14, 2022

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The Grenadian economy is gradually recovering from the pandemic.
Recovery led by construction and agriculture, supporting an expected expansion of real output by around 5 percent in 2022.
Tourism initially responded positively to the lifting of domestic quarantine requirements in late 2021.
Food, fuel, and transport prices are expected to continue pushing up inflation, also reflecting the impact of strained global supply chains.
The current account deficit has widened as weak tourism receipts, higher fuel prices and import demand from construction offset the recovery in agricultural exports.

The main risk is a prolonged pandemic, with implications for tourism and students’ return to Saint George’s University (SGU).
Ongoing outbreak globally and locally, coupled with a slow vaccination rate (with only one-third of the total population, or less than half of the eligible population, having received two doses, due to vaccine hesitancy), could weigh on tourism recovery and students’ return to the SGU campus.
Tourism and offshore education directly account for one quarter of the economy.
A prolonged shock could require additional government spending, exacerbating fiscal and external imbalances.

In 2020–21, the escape clause was triggered under the Fiscal Responsibility Law.
Two stimulus packages were launched: 2.4 percent and 1.2 percent of GDP, respectively, providing targeted support including wage subsidies, income support, social transfers, and additional health spending.
Given the ongoing pandemic, the 2022 Budget aims to increase social spending and capital expenditure to support the vulnerable, resilience building, and aggregate demand, with the escape clause triggered for the third year.
Public debt is estimated to have declined to 68.9 percent of GDP in 2021 (from 71.7 percent in 2020) and expected to continue declining supported by the economic recovery.
Recommendations to strengthen fiscal credibility: continued efforts to strengthen revenue administration, public investment management, and fiscal governance and transparency.

The pandemic’s impact on the financial sector has so far been limited, partly reflecting loan moratoria.
Credit growth has been moderate, particularly to businesses and individuals exposed to offshore education and tourism.
Loans under moratoria are slowly trending down as case-by-case workouts progress, but still represented a significant share of total loans for some banks as of end‑2021.
Nonperforming loans are rising, albeit from a low level.
Provisions will need to be strengthened among credit unions if nonperforming loans continue rising.
The enhanced frequency and intensity of monitoring of credit unions and insurers by the national nonbank regulator is welcome and should continue for the months ahead.

Authorities remain committed to building resilience to natural disasters and climate change.
Commendable progress has been made in marine and coastal protection, disaster resilience in schools, and registry of public assets to prepare for proper insurance and maintenance.
The pandemic has highlighted the urgency to further improve competitiveness to promote sustainable growth and job creation.

An IMF team led by Ms. Huidan Lin met virtually with the authorities of Grenada during January 6–12 to discuss recent economic developments and follow upon the policy priorities raised during the 2019 Article IV Consultation and the 2020 Request for Disbursement under the Rapid Credit Facility.
At the end of the mission, Ms. Lin issued the staff statement summarized above.
The mission team thanked the authorities for open and productive discussions and expressed solidarity with the people and government of Grenada as they respond to the COVID pandemic.

Press Release No. 22/07, January 14, 2022 — IMF staff statement.