July 25, 2018
PRESS OFFICER: Raphael Anspach and Maria Candia
Phone: +1 202 623-7100Email: MEDIA@IMF.org
On July 13, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation[1] with Grenada.
The Grenadian economy grew by an estimated 4½ percent in 2017, driven by strong activity in construction, tourism, and education sectors. Weather-related weakness in agriculture has, however, been a headwind. Unemployment fell from 28 percent in 2016 to 23.6 percent in 2017. Inflation is low, falling below 1 percent, supported by the peg to the US dollar. The 2017 current account deficit increased by 3½ percentage points of GDP to 6¾ percent of GDP, reflecting rapid import growth. The fiscal situation improved further in 2017, with the government overperforming the targets of the Fiscal Responsibility Law (FRL). The primary surplus increased to 5¾ percent of GDP while public debt fell below 71 percent of GDP at end-2017 from 82 percent of GDP in 2016.
In 2018 and 2019, the economy is projected to grow by 3½ percent benefiting from supportive global economic conditions and continued strength in construction and tourism. Thereafter, growth is expected to ease to the long-term potential rate of 2¾ percent. Inflation is expected to edge up in 2018 reflecting recent global energy price increases, but stabilize at 2 percent in the medium term. The primary fiscal surplus is expected to remain high in the near term, supporting rapid debt reduction. Once the public debt ratio falls below 55 percent of GDP (projected for 2020), the fiscal surpluses and the pace of debt reduction are expected to moderate. The external current account deficit is projected to increase to 7½ percent of GDP in 2018 mostly from recent increases in energy costs, but would decline thereafter as the construction-related imports and energy prices are expected to ease.
Executive Board Assessment[2]
Executive Directors commended the authorities for implementing sound policies leading to a strong economic and fiscal performance and sustained debt reduction. While the outlook remains positive, Directors stressed that continued policy resolve and public support for reforms are critical to restoring debt sustainability, improving medium‑term growth prospects, and strengthening the financial sector.
Directors welcomed the continued fiscal adjustment in compliance with the framework of the Fiscal Responsibility Law (FRL), which has supported policy credibility. They noted that while there is scope to improve the FRL’s operational aspects, more substantive changes to the framework should be approached as part of a comprehensive plan that balances debt reduction with the need to create fiscal space for high‑quality infrastructure spending. Directors welcomed the authorities’ intention to implement the recent initiatives on pensions and health care in a way that is consistent with the FRL’s targets.
Directors encouraged the authorities to support the FRL through continued reforms to improve public financial management, expenditure efficiency, and fiscal transparency. They saw scope to further strengthen social assistance programs to protect the most vulnerable and to strengthen the productivity of state‑owned enterprises. Directors emphasized the need to continue tax administration reforms and resolve remaining bilateral arrears. They welcomed advances in fiscal transparency, including the establishment of the Fiscal Responsibility Oversight Committee, and encouraged further progress in this area.
Directors welcomed indications of a strengthened banking system and considered that banks are better poised to contribute to private sector investment and growth. They noted the rapid increase in lending by credit unions and called for strengthening the supervision of the sector by the local regulator to reduce potential financial stability risks. Going forward, they encouraged the authorities to support steps taken at the ECCU level toward a regional approach to regulation and supervision of the non‑bank financial sector. Directors emphasized the importance of complying with AML/CFT regulations, including enforcement of the due diligence process of the Citizenship‑by‑Investment program, noting that this was critical for Grenada’s continued access to stable cross‑border payments.
Directors underscored the importance of implementing structural reforms to boost potential growth, noting Grenada’s susceptibility to natural disasters in addition to structural weaknesses such as high unemployment and the external competitiveness gap. They emphasized the need for measures to improve the business environment and labor market, address weaknesses in the implementation of public infrastructure spending, and reduce skill mismatches. Directors also encouraged the authorities to continue building on their efforts to strengthen resilience to natural disasters.
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Grenada: Selected Economic and Financial Indicators, 2015–2023 |
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Rank in UNDP Human Development Index |
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79 |
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Infant mortality rate per '000 births (2016) |
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9.9 |
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out of 188 countries (2016) |
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Adult illiteracy rate in percent (2004) |
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4 |
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Life expectancy at birth in years (2014) |
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73 |
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Poverty headcount index (2008) |
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38 |
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GNI per capita in US$ (2017) |
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10,390 |
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Unemployment rate (2017) |
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23.6 |
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Population in millions (2016) |
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0.11 |
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2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
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Proj. |
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(Annual percentage change, unless otherwise specified) |
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National income and prices |
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GDP at constant prices |
6.4 |
3.7 |
4.5 |
3.6 |
3.6 |
2.9 |
2.7 |
2.7 |
2.7 |
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GDP deflator |
2.8 |
2.2 |
0.9 |
2.7 |
2.2 |
2.2 |
2.2 |
2.2 |
2.2 |
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Consumer prices, end of period |
1.1 |
0.9 |
0.5 |
3.0 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
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Exchange Rate |
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Real effective exchange rate |
2.6 |
-0.2 |
-4.2 |
… |
… |
… |
… |
… |
… |
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(annual average, depreciation) |
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Money and credit, end of period |
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Credit to private sector |
-3.8 |
-0.2 |
0.6 |
5.6 |
8.0 |
6.8 |
6.6 |
6.4 |
5.6 |
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Broad money (M2) |
5.2 |
1.3 |
4.0 |
6.4 |
5.8 |
5.2 |
5.0 |
5.0 |
5.0 |
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Lending rate (in percent) |
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8.7 |
8.4 |
… |
… |
… |
… |
… |
… |
… |
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Deposit rate (in percent) |
1.6 |
1.3 |
… |
… |
… |
… |
… |
… |
… |
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Central government balances (accrual) |
(In percent of GDP, unless otherwise specified) |
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Revenue |
24.5 |
26.4 |
25.9 |
25.8 |
25.2 |
25.1 |
24.9 |
24.8 |
24.6 |
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Expenditure |
25.7 |
24.0 |
22.8 |
22.4 |
21.9 |
21.4 |
23.0 |
24.3 |
24.6 |
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o.w. Capital expenditure |
8.3 |
4.2 |
2.7 |
3.3 |
3.3 |
3.0 |
4.8 |
6.2 |
6.5 |
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Primary balance 1/ |
2.1 |
5.2 |
5.7 |
5.6 |
5.3 |
5.5 |
3.6 |
2.1 |
1.6 |
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Overall balance |
-1.2 |
2.3 |
3.0 |
3.4 |
3.3 |
3.6 |
1.9 |
0.5 |
0.0 |
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Public debt (incl. guaranteed) 2/ |
90.1 |
82.0 |
70.8 |
65.0 |
59.6 |
52.9 |
51.3 |
50.7 |
50.3 |
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Domestic |
28.7 |
25.1 |
22.7 |
17.9 |
15.8 |
13.7 |
12.4 |
11.7 |
11.1 |
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External |
61.4 |
56.9 |
48.0 |
47.1 |
43.8 |
39.2 |
38.9 |
39.0 |
39.2 |
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Savings-Investment balance |
-3.8 |
-3.2 |
-6.7 |
-7.4 |
-7.5 |
-6.6 |
-6.4 |
-6.7 |
-6.6 |
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Savings |
13.9 |
17.0 |
11.9 |
11.8 |
12.3 |
12.9 |
14.8 |
15.9 |
16.3 |
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Investment |
17.7 |
20.2 |
18.6 |
19.2 |
19.8 |
19.4 |
21.2 |
22.6 |
22.9 |
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External Sector |
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Gross international reserves (millions of dollars) |
188.5 |
201.4 |
194.9 |
202.4 |
208.8 |
212.7 |
214.3 |
216.3 |
225.4 |
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GIR (in months of imports) |
4.1 |
3.9 |
3.5 |
3.4 |
3.4 |
3.3 |
3.2 |
3.1 |
3.0 |
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Current account balance, o/w: |
-3.8 |
-3.2 |
-6.7 |
-7.4 |
-7.5 |
-6.6 |
-6.4 |
-6.7 |
-6.6 |
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Exports of goods and services |
58.0 |
56.1 |
56.3 |
56.3 |
56.2 |
56.0 |
55.9 |
55.9 |
55.8 |
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Imports of goods and services |
56.7 |
52.4 |
56.2 |
56.6 |
56.6 |
55.6 |
55.4 |
55.6 |
55.3 |
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External debt (gross) |
133.2 |
126.3 |
116.4 |
108.4 |
107.2 |
100.8 |
98.9 |
97.4 |
95.9 |
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Sources: Ministry of Finance; Eastern Caribbean Central Bank; United Nations, Human Development Report 2008; World Bank WDI 2007; and IMF staff estimates and projections. 1/ Includes 0.7% of GDP CBI-related non-tax revenue in 2015. 2/ Includes the impact of the in principle debt restructuring agreement reached with the creditor committee for the 2025 bonds.
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.
