ST. GEORGE’S, Grenada, CMC—The Government’s expenditures are expected to increase by 17 percent this year due to Hurricane Beryl’s passage in July, according to a mid-year review reported to be tabled in Parliament on Tuesday.
“Total expenditure for 2024 is estimated to be EC$1,548.1 million (One EC dollar=US$0.37 cents), representing a 17.2 percent (EC$227.2 million) increase over the budgeted amount of EC$1,320.9 million.
“This surge in expenditure is largely attributable to a substantial 44 percent increase in capital expenditure over the budgeted amount, reflecting heightened capital investment for rapid Hurricane Beryl response,” said the report, which the Ministry of Finance prepared.
The report said that based on the actual outturns up to June this year and other assumptions, Grenada’s fiscal performance for the entire year showed a notable divergence from the budgeted expectations.
“Following Grenada’s full rebound from the (COVID-19) pandemic in 2023, real GDP (gross domestic product) is projected to grow by 3.9 percent in 2024. This performance marks a deceleration in growth as major sectors, such as private education, reach peak output and other sectors grapple with the adverse effects of climate change in the form of extreme droughts and severe tropical cyclone occurrences,” said the report.
It further explained that the total revenue and grants are estimated at EC$1,404.1 million, 6.3 percent higher than the budgeted amount of EC$1,321.4 million.
“This increase is primarily due to higher-than-expected collections in non-tax revenue, particularly IMA revenues, which exceeded the budget by a significant margin of 42 percent,” said the document, which will be tabled in the Parliament by Finance Minister Dennis Cornwall.
The report noted that grants fell short of the budgeted amount by 30.5 percent during the first six months of the year, partially offsetting the gains from increased non-tax revenue. Legislators are expected to approve a supplementary budget of more than EC$269 million on Tuesday, and those funds will be used to address several programs created because of Hurricane Beryl’s damages to be spent before December 31.
“Overall, the fiscal performance for 2024 indicates a substantial fiscal deterioration driven by the need for significant spending to address the immediate and near-term challenges in the aftermath of Hurricane Beryl.
“This stands in sharp contrast to the more favorable fiscal position observed in 2023 and will lead to a severe deterioration of the overall balance and primary balance,” said the report, which described the first five months of 2024 as experiencing deceleration in several areas, including construction.
The Finance Ministry said that given the economic shock experienced as a result of Hurricane Beryl and the fiscal implications outlined, suspension of the Fiscal Resilience Act is necessary to accommodate the overall impact of the recovery and rebuilding process on the Government’s revenue and expenditure against the established fiscal targets.
Meanwhile, Grenada’s construction, wholesale, and retail sectors were experiencing a reduction in activity, but the devastation caused by the hurricane is expected to revive those sectors.
According to the Government’s mid-year review report, data for the first quarter of 2024 indicate a 1.3 percent reduction in the value of construction material imports compared to the same period in 2023, despite a 14.4 percent increase in the volume of materials imported, as measured by weight.
“This decrease in import value can be attributed mainly to global disinflationary pressures and the normalization of supply chain disruptions. Notwithstanding, the Macroeconomic Surveillance conducted in May 2024 noted that major private sector projects, such as Six Senses and Silversands Beach House, were completed in the first quarter, while other significant projects, including the Intercontinental Hotel, were either approaching completion or in the early stages of development.
“Consequently, a moderate slowdown in the construction of major private sector projects is expected,” said the report, which explained that despite the overall damages caused by the hurricane, the construction sector will experience growth up to 2025.
“Given Hurricane Beryl’s devastating impact on the sister isles and northern Grenada, where 95 percent of buildings were either damaged or destroyed, extensive reconstruction efforts are anticipated throughout the remainder of 2024 and into 2025,” it said.
“The reconstruction efforts are expected to stimulate the construction sector significantly, leading to a substantial increase in the importation of construction materials, specialized construction labor, and equipment to address the extensive scope of the rebuilding projects,” the Finance Ministry suggested in the report.
Whole and retail trade were the other sectors that experienced a decline in the first five months of this year.
“Data from the first five months of 2024, compared to the same period in 2023, reveals a decline in the wholesale and retail trade sectors,” said the report, which points out that the decrease was by 3.3 percent.
“This sector’s performance is evaluated through the retail sales of various items, including building materials, household items, agricultural products, and vehicles. By the end of May 2024, total retail sales had decreased by 3.3 percent.
“More specifically, retail sales of building materials experienced a significant drop of 12.4 percent, while retail sales excluding building materials saw a marginal decline of 0.2 percent. The notable reduction in retail sales of building materials is primarily attributed to the winding down of major construction projects in the first quarter of 2024,” said the report.
The Ministry of Finance said that despite this recorded decline in sales in the first five months of 2024, this sector will experience moderate growth for 2024.
“Hurricane Beryl’s catastrophic impact has fueled demand for relief items in support of affected citizens,” said the report, noting that wholesalers and retailers have reported a bump in the sales of perishable and non-perishable goods, vehicles, building supplies, water, household items and much more. This trend is likely to continue for the rest of 2024.
“However, with the influx of relief items entering the country, the market could experience an oversupply, negatively impacting the demand for purchases from local wholesalers and retailers,” the report added.
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