Compiled by: Sandra C A Ferguson
- “The economy is now projected to contract by over 9% in 2020. Local outbreaks of Covid-19 (with 14 reported cases) could cause yet deeper and more prolonged contraction in activity. Grenada’s solid fiscal position and strong macroeconomic performance prior to the Covid-19 crisis are key mitigants.” pg.1, Executive Summary, IMF Country Report No. 20/161, May 2020.
- Excerpts from Compliance Assessment Report: Supplementary Budget 2020 submitted to Parliament by the Rt. Hon. Prime Minister/Hon. Minister of Finance on 17 April 2020:
- pg. 4: “…In-house analysis of the Ministry of Finance has preliminarily estimated a contraction of 12.9% in real GDP in 2020” (own emphasis).
- Pg. 9: “The economic impact of Covid-19 is broad based, but the main assumptions for the pronounced decline in GDP estimated for 2020 are; a 50% decline in Tourism value added, 20% reduction in private education, and a 15% decrease in private construction activity as well as wholesale and retail trade” (own emphasis).
- Rapid Credit Facility:
A 28 April Press Release from the IMF advised that IMF Executive Board had approved a US$22.4 million disbursement for Grenada from the Rapid Credit Facility (RCF) mechanism to help cover “balance of payment needs stemming from the outbreak of the Covid-19 pandemic.” Grenada was accessing 100% of its quota under this facility. The IMF Report[1] supporting Grenada’s request was published on 13 May.
- Purpose:
The Press Release advised that the Rapid Credit Facility disbursement would support the following:
- Implementation of Covid-19 Measures: provide resources for the measures announced by the authorities of the borrowing countries: “essential health-related expenditures and income support to ease the impact of Covid-19 on the population.”
- Balance of Payments Support: help fill the balance of payments needs of the 3 countries balance of payments needs/Grenada’s projected BOP need in 2020, is around US$110 million, or 10% of GDP.
- Donor Support: catalyse further donor support to close the remaining balance of payments needs.
- Press Release from Office of Prime Minister:
A 15 May Press Release from the Office of the Prime Minister – IMF predicts economic growth of 6.25% for Grenada in 2021 – was posted on GIS[2] Facebook. It was also on a number of other websites including Caribbean Business Report.[3] The Press Release seems to have IGNORED the rest of 2020 and went straight to 2021!! In respect of 2021, the IMF report noted as follows: “…a modest recovery is ASSUMED beginning Q4 2020 (ie October–December), leading to a perceptible rebound in 2021 and project growth of about 6¼ percent.” (own emphasis).
The Press Release from the Office of the Prime Minister OMITTED:
- the forecast contained in the IMF Report – “The economy is now projected to contract by over 9% in 2020.”
- the caution sounded in respect of growth projections for 2021-22. “…staff’s projection of a solid economic recovery in 2021-22 is subject to significant downside risks.”
- Economic Forecast:
Re the economic outlook, the following was forecasted:
- Challenging Short Term Outlook: The short term economic outlook is challenging. Prior to the Covid-19 crisis Grenada’s key macroeconomic indicators were expected to remain broadly at 2019 levels.
- Sharp Decline in Growth: Growth is projected to DECLINE SHARPLY to –9.2% in 2020 (own emphasis).
- Decline in Tourism Exports: Tourism exports could decline by 50% by year on year in 2020; almost no arrivals in Q2 and Q3, ie no arrivals over the period March to September.
- St George’s University: A resumption of classes is not expected for some time.
- Projections 2021: A modest recovery is assumed beginning Q4 2020 (ie October–December), leading to a perceptible rebound in 2021 and project growth of about 6¼%.
- Risks Identified[4]:
“…Staff’s projection of a solid economic recovery in 2021–22 is subject to significant downside risks…”
Among the risks identified by the IMF Report were the following:
- Things Could Get Worse: Covid-19 spread could increase both globally and locally, putting more pressure on economic activity. It would have the following impacts:
- Global Recession: “a larger than expected global contraction” which would have local impact.
- Impact on Tourism: Travel would be negatively impacted. There would be less travel and “the global contraction” might create “a more protracted halt in tourism.”
- Disruption of Local Economy: Commercial activity would be disrupted, affecting demand for and supply of goods/services with its impact on jobs, employment, income and revenues.
- Vulnerability to Natural Disasters: An additional risk is Grenada’s vulnerability to natural disasters.
- Higher than Expected External and Fiscal Needs Financing Needs: Financing needs could be higher as a result of:
- Underestimation of the impact of Covid-19
- Uncertainty over trade
- Decline in tax revenues as a result of contraction in imports
- An increased need to support the private sector, including support to the financial need to support the private sector to address potential liquidity and solvency issues.
- Additional pressures that would result should there be a sudden stop in government and/or private sector financing flows.
- Impact of ICSID Judgement re Grenlec: This could result in a significant outflow of liquidity which would cause deterioration in the fiscal financing outlook. It is useful to note there that according to the Supplementary Budget, EC$8 million has been allocated for payment Grenlec to support the announced 30% reduction in electricity rates over the next 3 months. Even more interesting is the announcement by Minister Bowen that both Grenlec and the Government of Grenada have agreed not to make any public statements about this arrangement?
- Anti-Money Laundering/Combatting Financing Terrorism Vulnerabilities: Grenada’s vulnerabilities could affect its Correspondent Banking Relations and this would affect the flow of remittances.
- Spin Production?
Even the Supplementary Estimates and Compliance Assessment Report laid before Parliament on 17 April by the Rt Hon. Prime Minister/Minister of Finance advises as follows: “…In-house analysis of the Ministry of Finance has preliminarily estimated a contraction of 12.9% in real GDP in 2020” (own emphasis).
Was the press release from the Office of the Prime Minister the production of a SPIN room and to WHAT end?
[1] IMF Country Report No. 20/161, May 2020
[2] https://www.facebook.com/GISgrenada/photos/a.1887044398187611/3240594792832558/
[3] https://caribbeanbusinessreport.com/news/grenada-will-grow-by-6-25-in-2021-imf/
[4] IMF Country Report No. 20/161, May 2020, para 8-9, pg. 6.
The day they open travel to Grenada I will be on a plane.