On January 24, the Executive Board of the International Monetary Fund (IMF) completed its Article IV consultation with Grenada. The country's economy showed strong growth through June 2024, supported by tourism, moderated inflation, and a narrowing current account deficit. A significant increase in Citizenship-by-Investment (CBI) revenue improved Grenada's fiscal position and reduced public debt. However, Hurricane Beryl caused damage exceeding 16 percent of GDP on July 1 to Carriacou, Petite Martinique, and northern parishes of the main island. The government responded with fiscal measures that included suspending fiscal rules for temporary deficit spending to aid recovery.
Grenada's economic growth is projected to remain resilient at 3.9 percent in 2025 due to limited hurricane damage to tourism infrastructure and substantial recovery spending by authorities. With government savings and disaster-contingent instruments providing fiscal space, public debt is expected to continue decreasing towards a target of 60 percent of GDP by 2030.
The medium-term GDP growth is anticipated to slow as the tourism sector nears peak capacity during high season. Risks include natural disasters, potential shocks to tourism demand, uncertain CBI inflows, and vulnerabilities in the domestic non-bank financial system due to credit union expansion and rising property insurance costs. Prospective hotel developments and public investment projects could positively impact medium-term growth.
The IMF Executive Directors praised Grenada's economic performance in early 2024 driven by robust tourism activity. They commended the government's quick response to Hurricane Beryl which helped mitigate its economic impact. Directors advised maintaining fiscal prudence amid risks from natural disasters and external shocks while pursuing structural reforms for long-term growth resilience.
Directors highlighted Grenada’s commitment to fiscal prudence and debt sustainability with emphasis on returning promptly to suspended fiscal rules. They recommended continued expenditure prioritization and revenue mobilization for future investments including climate resilience efforts. Strengthening public investment management was also noted as important.
The banking system’s resilience was acknowledged despite repeated shocks; however, vigilance was urged for the expanding credit union sector along with strengthened oversight in property insurance due to rising premiums. Enhancements in AML/CFT frameworks were deemed essential for safeguarding correspondent banking relationships.
Directors endorsed Grenada’s Disaster Resilience Strategy which includes risk-layering frameworks like disaster-contingency insurance instruments but stressed advancing energy transition investments given future disaster risks.
Structural reform efforts should focus on fostering long-term growth through active labor market policies supporting off-season niche tourism while addressing data gaps remains crucial.
The next Article IV Consultation with Grenada is expected within a standard annual cycle.
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