by Bogdan Lissovolik and Wayne Mitchell, International Monetary Fund
The Grenadian economy is enjoying robust growth. GDP grew by 5% in 2017 and has been growing at a similar rate in early-2018, driven by strong activity in construction, tourism, and education.
Weather-related weaknesses in agriculture have, however, been a headwind. Unemployment, while falling, remains high at above 20%. Inflation has been below 1%, supported by the peg to the US dollar. FDI is estimated at 8½% of GDP, driven by tourism and proceeds from the Citizenship-by-Investment (CBI) programme.
The fiscal situation improved further in 2017, with the government overperforming the targets of the Fiscal Responsibility Law (FRL). The primary surplus increased to 5¾% of GDP (the FRL floor is 3.5% of GDP), supported by buoyant tax revenues while recurrent spending was contained. Targeted social spending was, appropriately, increased.
Nevertheless, a shortfall in grant financing and slow project execution kept capital outlays low. Public debt fell to around 70% of GDP in 2017 (from 82% of GDP in 2016) reflecting the strong fiscal position and completion of debt restructuring. Progress has also been made in addressing external and domestic arrears, although negotiations with three bilateral creditors aimed at fully regularising external arrears have yet to be concluded.