by Linda Straker
- 2020 was an exceptional year for Grenada’s economy
- Covid-19 pandemic led to a downturn in domestic economic activity
- Rising infections in 2021 can lead to curfews and protocols being reintroduced this year
The Fiscal Responsibility Oversight Committee (FROC) said that 2020 was an exceptional year for Grenada’s economy as the Covid-19 pandemic led to a downturn in domestic economic activity and a suspension of fiscal rules and targets in the Fiscal Responsibility Act.
In its 2020 report which was recently tabled in the Parliament, FROC assesses that having the projected growth of 6.0% for 2021 is optimistic, and the local economy needs additional policy support and effective immunisation to make this a reality.
“There are a number of reasons why the FROC is cautiously optimistic. Firstly, vaccination of more than 50% of the population may take until the third quarter of the year, which could perhaps delay the economic recovery,” said the report from the 5-member Committee which is chaired by former Ambassador to the UN, USA and the OAS Dr Angus Friday.
“Secondly, rising infections in 2021 can lead to curfews and protocols being reintroduced this year, which would see a softer recovery. Thirdly, a mass resumption of face-to-face classes for SGU students will not take place until August 2021, thus delaying the resumption of local activity that heavily relies on the presence of the students.”
“Fourthly, tourism will be affected by re-emerging and new restrictions on travelers. Various forecasts indicate that a recovery in global tourism will take place during 2023-2024.” The report points out that the pandemic brought challenges and opportunities to Grenada during the year under review and recommends, “The country should leverage the upside risks such as digital transformation and seek opportunities to diversify the economy. It is important that Grenada examines the future of trade and tourism while determining how it can diversify and increase its resilience as we enter the post Covid-19 period.”
Giving its assessment on the macroeconomic context, the Committee said that the pandemic can have lasting effects on Grenada, and it is therefore, necessary that policy actions build growth that is resilient and transformative.
The Covid-19 virus triggered the Escape Clause of the Fiscal Responsibility Act and the 2020 Report has been adjusted accordingly and does not include a report on compliance with the targets as required by law.
In 2015, the Grenada Government introduced what at the time was, and still is, pioneering legislation in the region on “Public Financial Matters”. One of the legislations is the Fiscal Responsibility Act.
The specific objectives of the FRA are: “to establish a transparent and accountable rule-based fiscal responsibility framework in Grenada, to guide and anchor fiscal policy during the budget process, to ensure that Government finances are sustainable over the short, medium, and long term, consistent with a sustainable level of debt, and for related matters.
The FRA created the Fiscal Responsibility Oversight Committee which is responsible for monitoring compliance with the fiscal rules and targets as stipulated in the Act and reporting to the House of Representatives.