Grenada’s Economy

EMBASSY OF GRENADA

MOSCOW, RUSSIA

Grenada's Economy

Grenada’s GDP grew an estimated 3.1% in 2019, driven by strong activity in construction and tourism. According to the updated IMF forecasts from 14 April 2020, due to the outbreak of the COVID-19, GDP growth is expected to slow down to -8% in 2020 and pick up to 6.1% in 2021, subject to the post-pandemic global economic recovery. The country relies on tourism and revenue generated by St. George’s University as its main source of foreign exchange. However, the government has been working on expanding its sources of revenue, including by the creation of the citizenship by investment program, which produced a resurgence in the construction and manufacturing sectors of the economy.

According to the IMF, gross debt decreased to 59.1% in 2019 and is projected to continue the downward trend in 2020 and 2021, reaching at 54.4% and 51.6% – thanks to the country’s adherence to the Fiscal Responsibility Law. The federal budget was positive at 3.8% and is expected at 4.3% and 4.6% in the following years, reflecting a combination of strong revenues and expenditure restraint. The inflation rate remained low at 0.8% in 2019, and should experience a decrease to 0.2% in 2020 and an increase to 1.2% in 2021, according to the latest World Economic Outlook of the IMF (April 2020). Even though Grenada is always at risk of natural disasters such as hurricanes, the country hasn’t been hit by any hurricanes in fifteen years, making it one of the Caribbean countries with the lowest risk of being affected by such disasters. As a result, Grenada’s economic situation tends to be more stable than those in risk areas, where natural disaster damage can have a huge economic impact. Also, the IMF has recognised Grenada’s structural adjustment program as significant in reducing debt and improving public finances. Furthermore, the National Democratic Congress has reneged on some financial commitments to the Caribbean Development Bank (CDB), the University of the West Indies (UWI), the World Bank and the International Monetary Fund (IMF); which has hampered its international reputation. LIAT, an important regional airline, is under financial stress and its collapse would severely hamper transportation in the region; the Grenada Government has offered a cash injection to subsidise strategic flights. Politically, Prime Minister Keith Mitchell and his New National Party (NNP) won all 15 parliamentary seats for the third time in the 2018 elections.

The unemployment rate has fallen significantly in recent years, but remains high at 24% of the active population in 2017 (Government of Grenada) . Structural weaknesses also include an external competitiveness gap, and a weak business environment and labour market. Also, groups such as farmers are exposed to limited education and severe damage derived from weather conditions.

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