Press Release No. 26/011

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with Grenada[1], and considered and endorsed the staff appraisal without a meeting.[2]

Grenada’s economy has proven resilient in the aftermath of Hurricane Beryl, despite elevated global uncertainties. Growth in 2025 is estimated to have accelerated to 4.4 percent, driven by strong investment and construction activity. Inflation has continued to moderate, reflecting easing global food and fuel prices. The fiscal position remains comfortable notwithstanding a temporary suspension of fiscal rules and an estimated 2025 primary deficit of 3.2 percent of GDP. Effectiveness of Grenada’s post-disaster financing framework and prudent savings of recent citizenship-by-investment (CBI) revenues have provided space for continued investment in key development priorities. The financial sector remains stable, with a modest post-hurricane impact.

Over the medium term, GDP growth is projected to gradually moderate to a more modest estimated potential rate of 2.7 percent by 2029 even as large public investment projects sustain high construction activity. Anticipated return to the 1.5 percent of GDP central government primary balance floor from 2027 would support keeping public debt on a sustainable trajectory, with the 60 percent of GDP target projected to be achieved by 2033. Key downside risks stem from Grenada’s high susceptibility to shocks associated with its tourism and import dependency as well as vulnerability to natural disasters. Faster-than-projected tourism resort developments represent the main upside risk.

Executive Board Assessment

In concluding the 2025 Article IV consultation with Grenada, Executive Directors endorsed staff’s appraisal, as follows:

Grenada’s economy continues to navigate elevated global uncertainties effectively in the aftermath of Hurricane Beryl. Economic activity remains robust, with strong investment and construction more than offsetting a moderation in tourism inflows. Major public infrastructure projects will sustain buoyant construction over the medium-term, extending the gradual moderation in overall growth toward its long-term potential. Current low inflation is expected to gradually normalize by 2028. Grenada’s external position in 2024 is assessed as weaker than the level implied by medium-term fundamentals and desirable policies and the large current account deficit will remain elevated over the medium-term until construction import pressures subside. Notwithstanding near-term fiscal deficits amid reconstruction and other priority spending, the underlying fiscal position remains sound.

Downside risks to the outlook persist amid heightened global economic and geopolitical uncertainties. These stem from Grenada’s high vulnerability to natural disasters and reliance on tourism and imports, even as moderate shocks to key tourism source countries or global commodity and shipping prices are assessed to have only modest impact. Risks could be amplified by disruptions to CBI and FDI inflows, materialization of risks in the domestic non-bank financial system or delays, or cost overruns in large investment projects. Faster-than-expected expansion in tourism capacity represents a key upside risk. A robust disaster resilience framework and government deposits provide important buffers against shocks.

The temporary suspension of the primary balance rule provided fiscal space for post-disaster reconstruction without disrupting other priority spending. Returning to the fiscal rules in 2027 is important to safeguard fiscal discipline and keep debt on a sustainable path. Continued expenditure prudence alongside revenue-enhancing measures would help preserve budget space for development priority investments.

The perimeter of the primary balance rule could be better aligned with the general government debt anchor. Capturing government off-budget and public on-lending-financed investments would help ensure the rule effectively restrains debt-creating spending. In the interim, such investments should be included in central government budget planning and adhere to equivalent reporting and auditing standards. Recent progress in strengthening SOE and statutory body oversight should continue with a view to eventually integrating these into the Medium-Term Fiscal Framework.

While the ambitious public investment projects address important development needs, the associated fiscal risks require careful management. This includes continuing recent strengthening of project management to minimize delays or cost overruns, and a careful assessment of future operating and maintenance costs to avoid unfunded liabilities. Plans to catalyze private investment, including around Project Polaris, underscore the need to operationalize the PPP framework. Strengthening management of CBI resources, continuing improvements to MTFF projections and clearing the backlog of audited government statements remain also important.

Accelerating system-wide credit growth and non-bank vulnerabilities call for careful monitoring. Higher bank lending reflects a still-nascent reversal from long-subdued credit conditions, supported by ample liquidity and relatively strong asset quality in the region. While credit unions show some encouraging asset quality improvements, ensuring loan loss provisions are sufficient and stepping up forbearance monitoring remain critical to safeguard against risks. Enhancing monitoring of reinsurance conditions and local market pricing in the general insurance sector remains important. The authorities are encouraged to maintain recent momentum in strengthening the AML/CFT framework.

The limited potential growth impact from Grenada’s FDI-driven tourism expansion highlights the need to strengthen the domestic foundations of growth. This includes more closely coordinated efforts to facilitate local investment and business development, enhancing locally offered tourism services and intersectoral linkages, reducing goods trade frictions, and strengthening the economy’s human capital and productivity underpinnings. Infrastructure project decisions should continue to pay close attention to disaster resilience in alignment with the updated National Adaptation plan.

Improving quality of economic data and institutional capacity is critical to support informed policymaking. Data deficiencies contribute to uncertainty in policy analysis and economic forecasts. These include common gaps in the region in balance of payments coverage, monitoring of large investment projects, outdated CPI weights, and missing GDP expenditure data. Capacity constraints from persistent staffing shortages and turnover warrant prioritized attention in alignment with the ongoing public sector functional review and staff regularization process.

 

 

 

Grenada: Selected Economic and Financial Indicators, 2020–30 1/

Rank in UNDP Human Development Index 73       Infant mortality rate per '000 births (2021) 14.4 out of 189 countries (2023)         Adult illiteracy rate in percent (2014) 1 Life expectancy at birth in years (2021) 75       Poverty rate in percent of population (2019) 25 GDP per capita in US$ (2023) 10,449       Unemployment rate (2025 Q2)   10.8 Population in millions (2023) 0.13                                               2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030             Est. Proj.                         Output and prices                       Real GDP -13.8 4.7 7.3 4.5 3.3 4.4 3.2 3.0 2.9 2.7 2.7 Nominal GDP -14.0 7.6 9.1 9.2 4.4 5.1 4.3 4.7 4.9 4.8 4.8 Consumer prices, end of period -0.8 1.9 2.9 2.2 0.8 0.3 1.3 1.6 2.0 2.0 2.0 Consumer prices, period average -0.7 1.2 2.6 2.7 1.1 0.7 1.1 1.6 2.0 2.0 2.0 Output gap (percent of potential GDP) -9.6 -7.4 -3.1 -1.4 -1.4 0.0 -0.1 0.0 0.0 0.0 0.0 Real effective exchange rate (+: appreciation) -0.6 -2.9 -1.2 -1.9 -2.1 … … … … … …                         Central government balances (accrual)                       Revenue and Grants 28.1 31.6 32.9 36.6 43.8 32.1 30.9 30.5 30.6 30.4 30.4 Taxes 22.1 20.6 21.6 23.5 23.6 23.5 23.9 23.9 23.9 23.9 23.9 Non-tax revenue 1/ 2.4 3.4 4.5 12.6 19.6 6.8 6.1 6.0 5.9 5.7 5.7 Grants 1/ 3.7 7.6 6.8 0.5 0.5 1.8 0.9 0.5 0.7 0.7 0.7 Expenditure 32.7 31.3 32.0 28.7 37.1 39.2 36.2 30.5 30.5 30.4 30.1 Current primary expenditure 21.1 20.9 20.1 18.0 21.8 22.2 21.9 21.5 21.4 21.4 21.5 Interest payments 2.0 1.8 1.6 1.5 3.3 3.9 1.8 1.5 1.5 1.5 1.2 Capital expenditure 9.6 8.6 10.3 9.2 12.0 13.1 12.6 7.4 7.6 7.5 7.4 Primary balance -2.6 2.1 2.6 9.4 10.0 -3.2 -3.5 1.5 1.5 1.5 1.5 Overall balance -4.5 0.3 0.9 7.9 6.7 -7.1 -5.3 0.0 0.0 0.0 0.3                         Central government debt (incl. guaranteed) 71.4 70.0 63.2 60.0 58.7 54.9 52.8 54.2 55.2 56.0 56.1 Domestic 16.2 15.3 12.8 11.2 10.3 9.9 9.5 9.3 9.1 9.0 8.4 External 55.2 54.7 50.3 48.8 48.4 45.0 43.3 44.9 46.1 47.0 47.7 Public debt (incl. debt of SOEs and SBs) 89.5 86.6 79.3 74.5 72.7 68.3 65.8 66.8 67.4 67.8 67.5                         Money and credit, end of period (annual percent change)                       Broad money (M2) 9.1 8.5 9.9 1.4 8.4 5.1 4.3 4.7 4.9 4.8 4.7 Credit to private sector 3.1 3.8 2.1 3.8 10.4 8.4 -5.3 5.4 5.4 5.2 5.1                         Balance of payments                       Current account balance, o/w: -16.1 -14.4 -12.1 -20.3 -21.1 -17.5 -16.3 -14.9 -14.4 -14.2 -14.0 Exports of goods and services 41.1 47.9 57.7 62.0 58.9 59.3 61.0 62.5 62.9 62.9 62.7 Imports of goods and services 52.2 55.4 64.1 69.2 70.1 67.2 67.2 67.4 67.4 67.3 66.9 Capital account balance 7.5 5.0 3.9 9.5 18.0 4.2 3.0 2.6 2.7 2.6 2.6 Financial account balance -7.2 -10.4 -7.2 -14.1 -1.7 -13.2 -13.3 -12.3 -11.7 -11.6 -11.4 Errors and omissions 1.4 -1.0 1.0 -4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 External debt (gross) 92.5 94.9 93.2 89.0 83.8 79.0 76.6 77.6 77.8 77.7 77.5                         Savings-Investment balance -16.1 -14.4 -12.1 -20.3 -20.8 -17.5 -16.3 -14.9 -14.4 -14.2 -14.0 Savings 16.3 15.7 17.8 12.6 10.4 15.6 16.2 12.3 12.4 12.3 12.2 Investment 32.4 30.1 29.9 32.8 31.2 33.0 32.5 27.2 26.8 26.5 26.2                         Memorandum items:                       Nominal GDP (millions of EC$) 2,817 3,030 3,305 3,608 3,768 3,961 4,133 4,327 4,541 4,759 4,987 Citizenship-by-Investment (CBI) inflows (percent of GDP) 9.0 9.3 10.9 31.3 29.6 10.2 7.8 7.7 7.4 7.1 7.0 Government CBI revenue (Percent of GDP) 3.6 4.0 4.1 12.7 14.7 4.4 3.5 3.5 3.3 3.2 3.2 Government deposits (Percent of GDP) 9.8 12.7 9.4 17.1 24.6 15.4 8.6 8.2 7.8 7.5 7.1 Net imputed international reserves                       Months of imports of goods and services 5.6 5.0 4.6 4.8 5.0 4.6 4.2 4.1 4.0 4.0 3.9 Sources: Country authorities; ECCB; United Nations, Human Development Report; World Bank WDI; and IMF staff estimates and projections. 1/ Investor donations to the National Transformation Fund (NTF) under the Citizenship-by-Investment (CBI) program that were used to finance public investment projects are recorded under grants until 2022 and subsequently under non-tax revenue starting from 2023.

 

[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] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.