{
  "title": "Grenada: Staff Concluding Statement of the 2022 Article IV Mission",
  "publication": "IMF News, February 25, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/02/25/grenada-staff-concluding-statement-of-the-2022-article-iv-mission",
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  "summary": "Tourism-dependent economy hit hard by COVID-19; authorities’ decisive policy response supported by policy space from past fiscal prudence helped contain the virus, protect lives and livelihoods, and pave the way for a gradual recovery.",
  "publishDate": "2022-02-25",
  "sections": [
    {
      "heading": "Context and key messages",
      "content": "- Tourism-dependent economy hit hard by COVID-19; authorities’ decisive policy response supported by policy space from past fiscal prudence helped contain the virus, protect lives and livelihoods, and pave the way for a gradual recovery.\n- Immediate priorities: accelerate vaccination and provide time-bound fiscal support.\n- Once recovery is firmly in place, rebuild fiscal buffers — including returning to the fiscal rules in 2023 — while reprioritizing spending to make space for investments in building resilience to climate change.\n- Strengthen domestic value added of tourism, including by strengthening agricultural sector linkages, investing in skills development and training, and shifting toward renewable energy."
    },
    {
      "heading": "Macroeconomic developments and outlook",
      "content": "- Real GDP: shrank by 14 percent in 2020; estimated to have expanded by 5.6 percent in 2021; projected to expand by 4.3 percent in 2022.\n- Stay-over tourist arrivals: picked up strongly in last months of 2021 but remained at only 25 percent of pre-crisis levels for the year as a whole.\n- Sector rebounds: construction and agriculture rebounded faster than tourism.\n- Fiscal outcome: fiscal balance excluding interest payments estimated to have maintained a surplus of around 2 percent of GDP in 2021; public debt declined to 70 percent of GDP in 2021.\n- Risks:\n  - Main risk: more prolonged pandemic, with implications for tourism and offshore education.\n  - Other risks: higher food and oil prices, prolonged supply chain disruption, tighter global financial conditions, natural disasters.\n  - Upside: effective deployment of public investment and acceleration of growth-enhancing reforms."
    },
    {
      "heading": "Fiscal policy, fiscal framework, and public investment",
      "content": "- 2022 fiscal stance: authorities triggered the escape clause for the fiscal rules for the third year to provide essential support to economic activity.\n- Policy guidance:\n  - Continue time-bound fiscal support in 2022, ensuring fiscal relief measures are temporary.\n  - Return to the fiscal rules in 2023 while supporting sustainable development and resilience building.\n  - Sustain recent increases in public investment—particularly those targeted at building resilience to climate change.\n  - Secure concessional financing and mobilize domestic resources to fund resilience outlays.\n  - Design and implement comprehensive pension reform (including an increase in contributions and a phased raise of the retirement age) to improve the financial position of the pension system.\n- Public spending efficiency:\n  - Improve implementation of public investment projects while reducing costs and fiscal risks.\n  - Implement the 2017 Public Service Management Reform Strategy to increase quality of public service delivery.\n  - Better targeting and enhanced coordination across ministries, including a comprehensive database of beneficiaries, to increase impact of social assistance programs.\n- Fiscal framework reform:\n  - Center on the medium-term debt anchor and simplify while ensuring predictable return to targeted debt path after shocks.\n  - Embed within a realistic and credible medium-term macro-fiscal framework.\n  - Strengthen roles and responsibilities of the Fiscal Responsibility Oversight Committee, including in assessing fiscal plans and conditions for activating the escape clause.\n  - Enhance fiscal transparency by timely publishing audited financial statements of the public sector, audited COVID-related spending, and reports of state-owned enterprises (SOEs)."
    },
    {
      "heading": "Supporting the recovery and structural policies for growth and jobs",
      "content": "- Tourism model:\n  - Facilitate shift toward stay‑over tourists given potential long-lasting reduction in demand for cruises.\n  - Strengthen domestic value added by aligning local producers with hotels and restaurants.\n  - Diversify tourism revenues by increasing number of flights, leveraging Saint George’s University to offer health services to visitors, and advancing fishing and eco-tourism ventures.\n- Disaster resilience:\n  - Implement Grenada’s Disaster Resilience Strategy as high priority.\n  - Establish public asset registry to prioritize maintenance spending on critical resilient infrastructure.\n  - Enforce building codes and broaden insurance coverage—particularly catastrophe risk insurance.\n  - Finalize legislative framework for Disaster Risk Management Act and develop a “risk map” for hydro-meteorological and geological hazards.\n  - Use Citizenship-by-Investment (CBI) Program inflows to ramp up resilience building and developments in other sectors, such as agri-business and ICT.\n- Energy and climate:\n  - Reduce carbon footprint and strengthen external position by shifting to renewables and investing in energy conservation.\n  - Support via regulatory adjustments, changes to construction standards, and incentives to invest in renewables.\n  - Assess and mitigate impacts of the energy transition on the poor and vulnerable."
    },
    {
      "heading": "Financial sector stability and supervision",
      "content": "- Overall performance: financial sector weathered the pandemic well.\n- Credit quality:\n  - Nonperforming loans in credit unions rose to 7.4 percent of total loans in end-2021; nonperforming loans among banks remain low.\n  - Risk of deterioration in asset quality as loan moratoria and regulatory forbearance expire.\n  - Banks have met ECCB’s recently-revised guidance on loss provisioning; credit unions need to increase provisioning.\n- Climate-related financial stability: need to strengthen monitoring of climate-related financial stability risks, particularly for the insurance sector.\n- Credit unions oversight:\n  - Rapid growth, high concentration, and smaller size than banks warrant strengthened oversight.\n  - Continue enhanced frequency and intensity of monitoring; ensure routine stress tests, strengthened governance, increased capital requirements, and collection/publication of more granular data.\n- AML/CFT:\n  - Continued efforts to strengthen the AML/CFT framework critical to lessen risks to correspondent banking relationships.\n  - Grenada has designated the ECCB as competent AML/CFT authority for banks.\n  - Increase cooperation between Grenada Authority for the Regulation of Financial Institutions, Grenada’s Financial Intelligence Unit, and the ECCB.\n  - Maintain robust due diligence of the CBI program."
    },
    {
      "heading": "Data gaps and statistical capacity",
      "content": "- Data provision: broadly adequate for surveillance but important shortcomings exist.\n- CARTAC technical assistance provided on national accounts, consumer price index, and external sector statistics.\n- Areas for improvement:\n  - Collection of high frequency indicators.\n  - Publication of consolidated financial statements of SOEs.\n  - Preparation of balance of payments data.\n- Constraints: compilation of statistics affected by mobility restrictions during the pandemic and turnover in the statistics office.\n- Recommendation: rebuild staffing levels and invest in training."
    },
    {
      "heading": "Selected social and economic indicators",
      "content": "- Social Indicators:\n  - Rank in UNDP Human Development Index out of 189 countries (2020): 74\n  - Life expectancy at birth in years (2020): 72\n  - GDP per capita in US$ (2020): 9,680\n  - Population in millions (2018): 0.11\n  - Infant mortality rate per '000 births (2019): 14.7\n  - Adult illiteracy rate in percent (2014): 1\n  - Poverty rate in percent of population (2019): 25\n  - Unemployment rate (2021 Q2): 17\n- Economic Indicators (annual percentage change, unless otherwise specified)\n  - GDP at constant prices: 2019: 0.7; 2020: -13.8; 2021 (Est.): 5.6; 2022 (Proj.): 4.3; 2023: 3.9\n  - GDP deflator: 2019: 1.2; 2020: -0.5; 2021 (Est.): 1.4; 2022 (Proj.): 3.7; 2023: 2.1\n  - Consumer prices, end of period: 2019: 0.1; 2020: -0.8; 2021 (Est.): 1.9; 2022 (Proj.): 3.6; 2023: 1.7\n  - Credit to private sector (end of period): 2019: 3.1; 2020: 4.1; 2021 (Est.): 4.5; 2022 (Proj.): 4.6\n  - Broad money (M2): 2019: 2.9; 2020: 9.1; 2021 (Est.): 9.2\n- Central government balances (accrual) (In percent of GDP, unless otherwise specified)\n  - Revenue and grants 1/: 2019: 27.2; 2020: 28.8; 2021 (Est.): 32.5; 2022 (Proj.): 29.8; 2023: (not listed)\n  - Expenditure 2/: 2019: 22.1; 2020: 27.6; 2021 (Est.): 32.1; 2022 (Proj.): 32.7; 2023: 28.2\n  - Of which: Capital expenditure: 2019: 2.7; 2020: 8.8; 2021 (Est.): 10.5; 2022 (Proj.): 6.8\n  - Primary balance: 2019: 7.0; 2020: 3.3; 2021 (Est.): 2.2; 2022 (Proj.): -0.9; 2023: 3.5\n  - Overall balance: 2019: 5.1; 2020: 0.3; 2021 (Est.): -2.9; 2022 (Proj.): 1.6\n  - Public debt (incl. guaranteed) 3/: 2019: 59.8; 2020: 73.1; 2021 (Est.): 70.3; 2022 (Proj.): 69.9; 2023: 68.1\n    - Domestic: 2019: 14.9; 2020: 16.6; 2021 (Est.): 19.0; 2022 (Proj.): 18.3; 2023: 16.8\n    - External: 2019: 44.9; 2020: 56.5; 2021 (Est.): 51.3; 2022 (Proj.): 51.6\n  - Savings-Investment balance: 2019: -14.9; 2020: -21.5; 2021 (Est.): -22.7; 2022 (Proj.): -22.6; 2023: -16.4\n    - Savings: 2019: 9.9; 2020: 1.1; 2021 (Est.): 7.5\n    - Investment: 2019: 24.8; 2020: 25.7; 2021 (Est.): 23.9; 2022 (Proj.): 26.5\n- External Sector\n  - Gross international reserves (in months of imports): 2019: 4.8; 2020: 5.4; 2021 (Est.): 5.2; 2022 (Proj.): 5.3\n  - Current account balance, of which:\n    - Exports of goods and services: 2019: 55.7; 2020: 41.4; 2021 (Est.): 41.0; 2022 (Proj.): 49.1; 2023: 56.9\n    - Imports of goods and services: 2019: 61.2; 2020: 57.6; 2021 (Est.): 59.3; 2022 (Proj.): 63.5; 2023: 63.7\n  - External debt (gross): 2019: 83.6; 2020: 95.2; 2021 (Est.): 92.1; 2022 (Proj.): 90.1; 2023: 86.8\n\nIMF mission team thanks the Grenadian authorities and other counterparts for their accommodative flexibility, warm hospitality, and constructive discussions.\n\n---\n\n\n References\n\n- Grenada and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/02/25/grenada-staff-concluding-statement-of-the-2022-article-iv-mission"
    }
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    "Published: February 25, 2022",
    "Tourism-dependent economy hit hard by COVID-19; authorities’ decisive policy response supported by policy space from past fiscal prudence helped contain the virus, protect lives and livelihoods, and pave the way for a gradual recovery.",
    "Immediate priorities: accelerate vaccination and provide time-bound fiscal support.",
    "Once recovery is firmly in place, rebuild fiscal buffers — including returning to the fiscal rules in 2023 — while reprioritizing spending to make space for investments in building resilience to climate change.",
    "Strengthen domestic value added of tourism, including by strengthening agricultural sector linkages, investing in skills development and training, and shifting toward renewable energy.",
    "Real GDP: shrank by 14 percent in 2020; estimated to have expanded by 5.6 percent in 2021; projected to expand by 4.3 percent in 2022.",
    "Stay-over tourist arrivals: picked up strongly in last months of 2021 but remained at only 25 percent of pre-crisis levels for the year as a whole.",
    "Sector rebounds: construction and agriculture rebounded faster than tourism.",
    "Fiscal outcome: fiscal balance excluding interest payments estimated to have maintained a surplus of around 2 percent of GDP in 2021; public debt declined to 70 percent of GDP in 2021.",
    "Risks:",
    "2022 fiscal stance: authorities triggered the escape clause for the fiscal rules for the third year to provide essential support to economic activity.",
    "Policy guidance:",
    "Public spending efficiency:",
    "Fiscal framework reform:",
    "Tourism model:",
    "Disaster resilience:",
    "Energy and climate:",
    "Overall performance: financial sector weathered the pandemic well.",
    "Credit quality:",
    "Climate-related financial stability: need to strengthen monitoring of climate-related financial stability risks, particularly for the insurance sector.",
    "Credit unions oversight:",
    "AML/CFT:",
    "Data provision: broadly adequate for surveillance but important shortcomings exist.",
    "CARTAC technical assistance provided on national accounts, consumer price index, and external sector statistics.",
    "Areas for improvement:",
    "Constraints: compilation of statistics affected by mobility restrictions during the pandemic and turnover in the statistics office.",
    "Recommendation: rebuild staffing levels and invest in training.",
    "Social Indicators:",
    "Economic Indicators (annual percentage change, unless otherwise specified)",
    "Central government balances (accrual) (In percent of GDP, unless otherwise specified)",
    "External Sector",
    "[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)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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