## IMF Executive Board Concludes 2018 Article IV Consultation with Grenada

_IMF News, July 25, 2018_

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## Bibliographic details
- Published: July 25, 2018

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### Recent performance and context
- 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 was a headwind in 2017.
- 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 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.

### Outlook and projections
- 2018 and 2019 growth is projected at 3½ percent, benefiting from supportive global 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), 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 construction-related imports and energy prices are expected to ease.

### Executive Board assessment and main messages
- Directors commended the authorities for implementing sound policies leading to a strong economic and fiscal performance and sustained debt reduction.
- 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 continued fiscal adjustment in compliance with the FRL and noted scope to improve the FRL’s operational aspects; they recommended approaching substantive changes as part of a comprehensive plan that balances debt reduction with the need to create fiscal space for high‑quality infrastructure spending.
- Directors welcomed authorities’ intention to implement recent initiatives on pensions and health care consistent with the FRL’s targets.
- Directors encouraged reforms to improve public financial management, expenditure efficiency, and fiscal transparency; they saw scope to strengthen social assistance programs and the productivity of state‑owned enterprises.
- Directors emphasized continuing tax administration reforms and resolving remaining bilateral arrears.
- Directors welcomed advances in fiscal transparency, including establishment of the Fiscal Responsibility Oversight Committee, and encouraged further progress.

### Financial sector and regulatory recommendations
- Directors welcomed indications of a strengthened banking system and considered that banks are better poised to contribute to private sector investment and growth.
- Directors noted the rapid increase in lending by credit unions and called for strengthening supervision of the sector by the local regulator to reduce potential financial stability risks.
- Directors encouraged support for ECCU-level steps 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 this was critical for Grenada’s continued access to stable cross‑border payments.

### Structural challenges and reform priorities
- Directors underscored the importance of implementing structural reforms to boost potential growth, noting Grenada’s susceptibility to natural disasters and structural weaknesses such as high unemployment and the external competitiveness gap.
- Recommended measures include improving the business environment and labor market, addressing weaknesses in implementation of public infrastructure spending, reducing skill mismatches, and continuing efforts to strengthen resilience to natural disasters.

### Selected economic and financial indicators (2015–2023, as presented)
- Rank in UNDP Human Development Index: 79
- Infant mortality rate per '000 births (2016): 9.9
- Adult illiteracy rate in percent (2004): 4
- Life expectancy at birth in years (2014): 73
- Poverty headcount index (2008): 38
- GNI per capita in US$ (2017): 10,390
- Unemployment rate (2017): 23.6
- Population in millions (2016): 0.11

Key annual figures (selected)
- GDP at constant prices: 2015: 6.4; 2016: 3.7; 2017: 4.5; 2018: 3.6; 2019: 2.9; 2020: 2.7; 2021: 2.7; 2022: (not shown); 2023: (not shown)
- GDP deflator: 2015: 2.8; 2016: 2.2; 2017: 0.9
- Consumer prices, end of period: 2015: 1.1; 2016: 0.5; 2017: 3.0; 2018: 2.0
- Real effective exchange rate (annual average, depreciation): 2015: 2.6; 2016: -0.2; 2017: -4.2
- Credit to private sector: 2015: -3.8; 2016: 0.6; 2017: 5.6; 2018: 8.0; 2019: 6.8; 2020: 6.6
- Broad money (M2): 2015: 5.2; 2016: 1.3; 2017: 4.0; 2018: 5.8; 2019: 5.0
- Lending rate (in percent): 2015: 8.7; 2016: 8.4
- Deposit rate (in percent): 2015: 1.6

Central government balances (in percent of GDP)
- Revenue: 2015: 24.5; 2016: 26.4; 2017: 25.9; 2018: 25.8; 2019: 25.2; 2020: 25.1; 2021: 24.9; 2022: 24.8; 2023: 24.6
- Expenditure: 2015: 25.7; 2016: 24.0; 2017: 22.8; 2018: 22.4; 2019: 21.9; 2020: 21.4; 2021: 23.0; 2022: 24.3
- Capital expenditure (o.w.): 2015: 8.3; 2016: 4.2; 2017: 3.3; 2018: 4.8; 2019: 6.2; 2020: 6.5
- Primary balance 1/: 2015: 2.1; 2016: 5.7; 2017: 5.3; 2018: 5.5
- Overall balance: 2015: -1.2; 2016: 2.3; 2017: 3.4; 2018: 1.9; 2019: 0.0

Public debt (incl. guaranteed) 2/
- 2015: 90.1; 2016: 82.0; 2017: 70.8; 2018: 65.0; 2019: 59.6; 2020: 52.9; 2021: 51.3; 2022: 50.7; 2023: 50.3
- Domestic: 2015: 28.7; 2016: 22.7; 2017: 17.9; 2018: 15.8; 2019: 13.7; 2020: 12.4; 2021: 11.7; 2022: 11.1
- External: 2015: 61.4; 2016: 56.9; 2017: 48.0; 2018: 47.1; 2019: 43.8; 2020: 39.2; 2021: 38.9; 2022: 39.0

External sector
- Gross international reserves (millions of dollars): 2015: 188.5; 2016: 201.4; 2017: 194.9; 2018: 202.4; 2019: 208.8; 2020: 212.7; 2021: 214.3; 2022: 216.3; 2023: 225.4
- GIR (in months of imports): 2015: 4.1; 2016: 3.9; 2017: 3.5; 2018: 3.2; 2019: 3.1
- Savings-Investment balance: 2015: -3.2; 2016: -6.7; 2017: -7.4; 2018: -7.5; 2019: -6.6; 2020: -6.4
- Savings: 2015: 13.9; 2016: 17.0; 2017: 11.9; 2018: 11.8; 2019: 12.3; 2020: 12.9; 2021: 14.8; 2022: 15.9; 2023: 16.3
- Investment: 2015: 17.7; 2016: 20.2; 2017: 18.6; 2018: 19.2; 2019: 19.8; 2020: 19.4; 2021: 21.2; 2022: 22.6; 2023: 22.9
- Current account balance, o/w: exports of goods and services: 2015: 58.0; 2016: 56.1; 2017: 56.3; 2018: 56.2; 2019: 56.0; 2020: 55.9; 2021: 55.8
- Imports of goods and services: 2015: 56.7; 2016: 52.4; 2017: 56.6; 2018: 55.6; 2019: 55.4; 2020: 55.3
- External debt (gross): 2015: 133.2; 2016: 126.3; 2017: 116.4; 2018: 108.4; 2019: 107.2; 2020: 100.8; 2021: 98.9; 2022: 97.4; 2023: 95.9

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.

*IMF Communications Department, Press Release No. 18/312, July 25, 2018.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Grenada and the IMF](http://www.imf.org/external/country/GRD/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2018/07/25/pr18313-grenada-imf-executive-board-concludes-2018-article-iv-consultation_