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IMF predicts continued “robust’ growth of Grenadian economy

The International Monetary Fund (IMF) is predicting robust growth for Grenada’s economy this year, and expects it to surpass its pre-pandemic level.

An IMF mission, headed by Janne Hukka, recently ended a three-day visit (November 15 – 17) here, during which they met with authorities to discuss current economic developments and follow up on the policy priorities raised during the 2023 Article IV Consultation.

In a statement issued by the IMF, Hukka said that growth has been driven by continued strength in construction and a sustained increase in tourist arrivals, in part due to successful efforts to improve airlift. He said record revenues from the Citizenship-by-Investment (CBI) programme have supported both public and private investment.

Hukka said at the same time headline inflation remains low at 2.3 per cent year on year in September and still-elevated food price inflation at 6.8 per cent 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 that the near-term fiscal outlook has improved with recent strong revenue performance.

“This reflects the buoyant economic activity as well as 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 government is advancing an ambitious fiscal reform agenda and that the new Fiscal Resilience Act takes important steps to simplify Grenada’s existing fiscal rules framework in guiding longer-term fiscal discipline.

He said it will also broadens the coverage of the framework’s public debt anchor, strengthen the role of the medium-term fiscal framework in guiding revenue and expenditure policies, and enhance the role of the Fiscal Resilience Oversight Committee (FROC).

“An appropriately phased regularization of public sector workers, guided by the ongoing review of job functions, can help improve efficient delivery of public services alongside the broader public sector service reforms.

“The government is also in 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, once it becomes operational, can mitigate credit quality risks and support local lending.

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