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Friday, June 23 2017 @ 06:23 AM AST

Grenada now one of Caribbean's fastest growing economies

Grenada is now one of the Caribbean's fastest growing economies, according to the International Monetary Fund (IMF) statement at the end of a staff visit yesterday (March 22).

IMF Mission Chief Nicole Laframboise said: "Real gross domestic product (GDP) is estimated to have expanded by 3.9 per cent in 2016, implying annual real GDP growth of 5.8 per cent on average from 2014-2016. Activity in 2016 was driven by tourism, construction, and some pick up in domestic demand, while agriculture experienced weather-related contraction. Growth is expected to moderate to 2.5 per cent in 2017, near its estimated potential. Average consumer price index (CPI) inflation rose to 1.7 per cent in 2016 and is forecast at 2.6 per cent in 2017 as oil and food prices start to rise. With steady tourism momentum, the external position remains stable."

She said the Grenada Government spends within its means. She said" "The Government achieved a primary surplus (fiscal balance excluding interest payments) in 2016 of 5.3 per cent of GDP. Expenditures were kept under firm control, and tax revenues performed well across all categories, driven by improvements in compliance and administration as well as robust activity."

Grenada has restructuring over 90 per cent of its debt since 2014, Laframboise said. "Public debt is forecast to fall to 72 per cent at end-2017, a drop of 36 percentage points from its peak of 108 per cent in 2013. This sizeable decline in the debt-to-GDP ratio is attributed to all three key factors: debt relief and restructuring, fiscal adjustment, and strong GDP growth."

Employment has grown on average by about 4 per cent annually since 2014, but unemployment in Grenada is high, particularly for the youth. She said: "Labor force statistics suggest an important skills mismatch in the economy. A review of education curriculums and new labor market programs to improve training and job search tools, in collaboration with the private sector, would help address this mismatch."

Laframboise said: "Despite marked progress, it is important to note that public debt is still relatively high and further effort is needed to reach the medium term target. Grenada is a small open economy susceptible to external shocks, including from natural disasters, swings in key tourism markets, commodity price shocks, as well as potential volatility of Citizen-by-Investment revenues. With these types of vulnerabilities, lower debt and higher reserve buffers will help the country mitigate the impact of external shocks to avoid output losses and setbacks in income and social progress."

She said: "In this light, continued policy resolve will be needed to safeguard the progress thus far and achieve the country’s medium term debt reduction goals. The government agreed with staff on the imperative of adhering to the strengthened policy framework. Follow through on the Fiscal Responsibility legislation and the full set of systems and practices of public finance management developed over the past three years is critical to secure fiscal sustainability for future generations. It will also build credibility in the rules-based policy framework."

"In support of this goal, the government is preparing a strategy to modernize the management of the public sector. This three-year strategy will aid in improving the operations and efficiency of the public sector as well as develop a fair and rational system of compensation and incentives. There will be extensive consultation on the strategy and its implementation with all stakeholders.

"The government and people of Grenada should be commended for their achievements during the Home Grown program, particularly with respect to debt reduction, growth, and the strengthened fiscal policy framework. This success is due in no small part to the strong country ownership and high degree of consultation and collaboration with stakeholders, in particular the Committee of Social Partners and the Home Grown Monitoring Committee. We encourage Grenada to press ahead with its medium term goals and to focus on ways to promote growth further and lower unemployment to improve the economic opportunities for all Grenadians.

"The IMF remains committed to supporting Grenada. The team is grateful for the warm welcome extended to us by the authorities and representatives of the private sector, labor, civil society, and financial institutions, and for the constructive discussions."

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