IMF Executive Board Concludes 2022 Article IV Consultation with Grenada
IMF News, May 10, 2022
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- Published: May 10, 2022
Pandemic impact and recent developments
- Tourism-dependent economy: real output declined by 14 percent in 2020.
- Growth: 2021 estimated at 5.6 percent, driven by construction and agriculture.
- Policy response: containment measures, increased health and social spending, expanded public investment program.
- Fiscal and external consequences: central government debt rose and the current account deficit widened.
- Financial sector: has so far weathered the crisis well.
- Government priorities: seeking international support to implement Disaster Resilience Strategy and transition towards renewable energy.
Near-term outlook and risks
- Growth projection: 3.6 percent in 2022 on construction activity, gradual pickup in tourist arrivals, and recovery in offshore education.
- War in Ukraine: affects Grenada primarily through higher commodity prices and is a significant headwind.
- Major risks: a further rise in global commodity prices (potentially increasing inflation) and a more prolonged pandemic with implications for tourism recovery.
Executive Board assessment and policy guidance
- Commendation: authorities’ timely response to the pandemic, facilitated by past fiscal prudence.
- Immediate priorities emphasized by Directors:
- Accelerate vaccination.
- Provide time-bound fiscal support for the most vulnerable.
- Medium-term priorities:
- Implement reforms to build resilience to climate change.
- Increase economic diversification to promote higher and more inclusive long-term growth.
- Fiscal framework:
- Triggering the escape clause under the fiscal responsibility framework (FRF) for the third time was judged appropriate given the economic situation.
- Directors encouraged a timely return to fiscal rules and a strengthening of the FRF over time—supported by Fund technical assistance—to underpin fiscal credibility and debt sustainability.
- Importance of securing concessional financing and mobilizing domestic resources to finance resilience-building investments; welcome for efforts to increase spending efficiency and transparency.
- Note on fiscal risks: recent court ruling on public pensions could pose potential fiscal risks; need to ensure pension system sustainability.
- Financial sector recommendations:
- Monitor asset quality closely as loan moratoria and regulatory forbearance expire.
- Increase provisioning and strengthen supervisory oversight of credit unions.
- Further strengthen the AML/CFT framework to help maintain correspondent banking relationships.
- Structural recommendations to boost competitiveness and growth:
- Increase value-added in tourism through deeper linkages across sectors.
- Diversify tourism sources.
- Improve cost competitiveness.
- Address long-standing labor skills mismatches.
Selected economic and financial indicators (as presented)
- Human development and social indicators:
- Rank in UNDP Human Development Index: 74 (out of 189 countries, 2020)
- Infant mortality rate (2019, per 1000): 14.7
- Adult illiteracy rate in percent (2014): 1
- Life expectancy at birth in years (2020): 72
- Poverty rate in percent of population (2019): 25
- GDP per capita in US$ (2020): 9,680
- Population in millions (2018): 0.11
- Unemployment rate (2021 Q2): 17
- National income and prices (selected years: 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027)
- GDP at constant prices: 0.7; -13.8; 5.6; 3.6; 3.9; 3.5; 3.2; 2.8
- GDP deflator: 0.6; -0.7; 1.2; 3.1; 3.3; 1.8; 2.0; 2.2
- Consumer prices, end of period: 0.1; -0.8; 1.9; 5.4; 2.3
- Credit to private sector (end of period): 1.4; 3.8; 4.2; 3.4
- Broad money (M2): 2.9; 9.1; 8.5; 3.0
- Central government balances (accrual) (percent of GDP, selected)
- Revenue and grants 1/: 26.6; 28.1; 31.8; 29.0; 29.6; 28.8; 28.2; 28.0
- Expenditure 2/: 21.6; 26.9; 31.5; 32.4; 27.9; 26.1; 25.7; 25.6
- o.w. Capital expenditure: 2.6; 8.6; 10.4; 6.9; 5.7; 4.6; 4.7
- Primary balance: 6.8; 2.1; -1.5; 4.3
- Overall balance: 5.0; 0.3; -3.4; 1.7; 2.4
- Public debt (incl. guaranteed) (percent of GDP)
- Total: 58.5; 71.4; 70.3; 69.0; 66.5; 64.4; 58.9; 53.6; 48.6
- Domestic: 14.6; 16.2; 15.4; 15.3; 13.8; 12.5; 11.4; 9.6; 8.0
- External: 44.0; 55.2; 54.9; 53.8; 52.7; 51.8; 47.6; 40.6; 36.0
- Savings-Investment balance (percent of GDP)
- Balance: -14.6; -21.0; -24.5; -27.9; -20.6; -15.4; -13.6; -12.9; -12.4
- Savings: 9.8; 4.5; 8.9; 10.1
- Investment: 24.4; 25.2; 25.0; 23.8; 24.3; 24.9
- External sector
- Gross international reserves (US$, millions): 234.1; 290.9; 324.2; 353.2; 357.2; 361.2; 363.2; 371.2; 378.7
- Reserves (in months of imports): 4.8; 5.2; 5.1; 4.4
- Exports of goods and services (percent of GDP): 54.5; 40.4; 40.1; 47.5; 54.4; 59.9; 61.7; 61.3; 61.2
- Imports of goods and services (percent of GDP): 56.3; 60.4; 67.5; 65.6; 66.0; 65.9; 64.7; 64.0
- External debt (gross) (percent of GDP): 81.8; 92.9; 94.8; 91.7; 87.5; 83.9; 77.5; 72.5; 68.0
- Notes provided with indicators:
- 1/ Includes Citizenship-by-Investment (CBI) related non-tax revenue.
- 2/ The expenditure classification was revised in 2016 from GFSM 1986 format to GFSM 2014 format.
- 3/ Includes the impact of the debt restructuring agreement for the 2025 bonds.
Source: IMF Press Release No. 22/147 — IMF Executive Board Concludes 2022 Article IV Consultation with Grenada (May 10, 2022).
