Grenada: Staff Concluding Statement of the 2025 Article IV Mission
IMF News, October 29, 2025
Source details
- Canonical URL
- Grenada: Staff Concluding Statement of the 2025 Article IV Mission
Other formats
Bibliographic details
- Published: October 29, 2025
Economic context and mission findings
- Grenada’s economy continues to navigate elevated global uncertainties in the aftermath of Hurricane Beryl.
- Economic activity remains robust, driven by strong construction and other domestic sectors that offset moderating growth in tourism.
- Fiscal position described as comfortable, supported by the proven effectiveness of the post-disaster financing framework and prudent savings of recent citizenship-by-investment (CBI) revenues.
- Mission focused on three key priorities:
- ensuring careful management of large public investments in alignment with public debt reduction objectives,
- containing vulnerabilities in the non-bank financial system,
- strengthening foundations for long-term growth and resilience.
Near-term and medium-term outlook
- GDP growth projections and dynamics:
- GDP growth projected to accelerate to 4.4 percent in 2025 (from an estimated 3.3 percent in 2024).
- Headline growth projected to gradually taper to an estimated potential rate of 2.7 percent by 2029.
- High construction activity over the medium term, particularly for a new teaching hospital under Project Polaris, will sustain investment.
- Inflation and external sector:
- Moderating inflation expected to gradually normalize to around 2 percent by 2028.
- Current account deficits projected to gradually narrow but remain elevated over the medium term due to high construction imports.
- Financial system:
- Financial system remains stable amid strong recovery from historically subdued bank credit growth.
Fiscal position and public debt trajectory
- Fiscal balances and targets:
- Increased public investment amid more moderate non-tax revenue is projected to result in a 2025 primary deficit of 2.8 percent of GDP.
- Central government is committed to returning to the 1.5 percent of GDP primary balance floor from 2027.
- Central government concessional borrowing to fund planned infrastructure investments would temporarily halt the decline in general government debt.
- General government debt projected to reach the 60 percent of GDP target by 2033.
- Public investment and fiscal risks:
- Large public investment projects address development needs but require careful management of long-term fiscal risks, including post-completion operating and maintenance costs.
- Recommendation to pursue a more comprehensive primary balance rule to align the fiscal rules framework more closely with the general government debt anchor.
- Interim recommendation that investments through statutory entities be included in central government budget planning and adhere to equivalent reporting and auditing requirements.
- Strengthen oversight and monitoring of state-owned enterprises and statutory bodies as their importance in fiscal operations increases.
Public financial management and investment execution
- Continue improvements to public investment and financial management alongside scaled-up public investment.
- Maintain recent progress in project management and monitoring that has improved investment execution.
- Operationalize the public-private partnership framework to catalyze private investment, including around Project Polaris.
- Integrate government savings with the debt management strategy to optimize financing costs.
- Further strengthen medium-term fiscal framework projections to support a shift to multi-year budget planning.
- Near-term revenue and spending measures suggested:
- Broaden the domestic tax base.
- Continue strengthening tax administration.
- Explore alternatives to costly tax reductions to incentivize low-emission vehicles.
- Introduce a more rules-based cost-price pass-through formula for gasoline.
- Improve targeting and efficiency of social benefits over time.
Non-bank financial sector vulnerabilities
- Credit growth and monitoring:
- Accelerating system-wide credit growth warrants careful monitoring; uptick in bank lending reflects normalization from historically subdued credit conditions.
- Credit growth backed by high system liquidity and strong asset quality compared to regional peers.
- Credit union and provisioning concerns:
- Credit union asset quality shows encouraging signs of improvement, but ensuring adequacy of loan loss provisioning with prudent treatment of collateral values is critical.
- Supervisory and market recommendations:
- Step up monitoring of loan forbearance practices and align impaired asset treatment with banks.
- Further enhance risk-based supervision and stress testing capacity.
- In the general insurance sector, enhance monitoring of reinsurance conditions and local market premium developments.
- Address pending action items from the CFTAF Mutual Evaluation to strengthen the AML/CFT framework.
Enhancing long-term growth, resilience, and institutional capacity
- Boosting domestic investment and tourism linkages:
- Facilitate domestic investment and deepen tourism sector integration with the local economy to boost long-term growth.
- The tourism-led growth model’s impact on GDP potential has been muted due to high foreign inputs and weak local investment; recent uptick in local private investment is encouraging.
- Strengthen small business development and access to finance, leverage regional initiatives such as the partial credit guarantee scheme, and deepen digitalization.
- Enhance locally offered tourism services, interlinkages with other sectors, and development of niche market offerings.
- Calibrated infrastructure investments, including Project Polaris, can catalyze these efforts when aligned with Grenada’s comparative advantage.
- Human capital, productivity, and resilience:
- Expand youth-focused technical and vocational training.
- Continue modernization of education infrastructure and enhance job-matching services.
- Progress development partner-supported efforts to diversify the energy base and explore cost-effective opportunities to diversify import source markets.
- Continue investment in disaster-resilient infrastructure to complement the post-disaster financing framework proven effective after the 2024 Hurricane Beryl.
- Strengthening statistics and institutional capacity:
- Data deficiencies hamper surveillance and increase uncertainty in economic projections; gaps include balance of payments coverage, monitoring of large investment projects, outdated CPI weights, and absence of GDP expenditure data.
- Staffing shortages and high turnover in key areas supporting macroeconomic surveillance and analysis are major constraints.
- Prioritize addressing staffing and data gaps in alignment with the ongoing public sector functional review and regularization process to harness technical capacity building support.
Source: Grenada: Staff Concluding Statement of the 2025 Article IV Mission, October 29, 2025.