WASHINGTON, CMC – The International Monetary Fund (IMF) predicts that the Grenada economy will continue growing “robustly” and is expected to surpass its pre-pandemic level in 2023.
An IMF mission, headed by Janne Hukka, has ended a three-day visit meeting with Grenadian authorities to discuss recent economic developments and follow up on the policy priorities raised during the 2023 Article IV Consultation.
In a statement, Hukka said that growth has been driven by continued strength in construction and a sustained increase in tourist arrivals, partly due to successful efforts to improve airlift. He said record revenues from the Citizenship-by-Investment (CBI) program have supported public and private investment.
Hukka said that headline inflation remained low at 2.3 percent year on year in September, and food price inflation is still elevated at 6.8 percent year on year and is gradually easing from recent highs.
“Key risks to the outlook include external shocks disrupting tourism or CBI inflows, potential commodity price volatility amid heightened geopolitical uncertainty, and the ever-present risk of natural disasters.”
The IMF said the near-term fiscal outlook has improved with recent strong revenue performance.
“This reflects the buoyant economic activity and a surge in government CBI revenue, which is anticipated to normalize after the current backlog of CBI applications is cleared. The 2023 supplementary budget utilized some of the additional fiscal space to scale up public investment, although execution delays are anticipated to result in a higher-than-budgeted central government surplus. Central government debt remains on a downward path.”
Hukka said that the Grenadian authorities are advancing an ambitious fiscal reform agenda. The new Fiscal Resilience Act takes necessary steps to simplify Grenada’s existing fiscal rules framework in guiding longer-term budgetary discipline.
He said it also broadens the coverage of the framework’s public debt anchor, strengthens the role of the medium-term fiscal framework in guiding revenue and expenditure policies, and enhances the Fiscal Resilience Oversight Committee (FROC) role.
“An appropriately phased regularization of public sector workers, guided by the ongoing review of job functions, can help improve.
“The government is also in the process of modernizing the tax administration to facilitate online payments. The authorities’ parametric pension reforms, including the recently approved phased increase in the retirement age to 65, will materially help shore up the National Insurance Scheme’s longer-term sustainability.
“An actuarially sound and carefully coordinated reform of the public sector pension scheme remains a high priority to contain the fiscal burden on government finances,” Hukka added.
The IMF said that the Grenadian financial sector remains stable and liquid. Bank credit growth has increased with greater demand for construction and durable consumer goods loans.
Non-performing loans in credit unions remain elevated, prompting intensifying supervisory measures to tighten lending standards and enforce corrective actions for institutions that do not meet prudential requirements.
Hukka said encouraging all financial institutions to leverage the Eastern Caribbean Currency Union (ECCU) regional credit bureau can mitigate credit quality risks and support local lending once it becomes operational.
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