Grenada still fastest-growing economy in Caribbean, reports CDB

Wednesday, March 20, 2019

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BRIDGETOWN, Barbados (CMC) — The medium-term outlook for Grenada is positive, and for 2019 the Caribbean Development Bank (CDB) is projecting economic growth of 4.5 per cent, with similar outcomes expected over the medium term.

The CDB said construction, tourism, agriculture, and private education sectors will also drive performance, noting that in terms of construction there should be further momentum from major road network upgrades and ongoing private sector projects.

The tourism sector should continue to expand as a result of increased room capacity and higher demand, while the agriculture sector should recover, reflecting the start of projects aimed at mitigating the effects of weather conditions.

“Notwithstanding, economic growth is still expected to be tempered by the decline in private sector credit in 2018,” the CDB reported in its “Country Economic Review 2018-Grenada”, adding that fiscal performances in 2019 should continue to benefit from the Government's adherence to the Fiscal Responsibility Act (FRA).

The bank said that the primary and overall surpluses are projected to be 5.5 per cent and 3.5 per cent of gross domestic product (GDP), respectively.

“This would represent continued adherence to GOGR's policy of fiscal sustainability. In addition, debt sustainability is expected to be restored over the medium term by means of further fiscal consolidation. Public debt is projected to be 59.6 per cent in 2019.”

The CDB said that GDP grew by 5.2 per cent last year, driven by increased economic activity in the construction, tourism, private education and manufacturing sectors. As a result, the unemployment rate fell. Consumer prices rose by 2.8 per cent.

In 2018, Grenada continued to be the fastest-growing economy in the region with the CDN indicating that growth was estimated at 5.2 per cent for the year, which translates to a five-year average of five per cent.

“This strong outcome was driven by rising economic activity in the construction, private education and manufacturing sectors, and was above the Government's forecast in the 2017 Budget.

“Economic activity in the construction sector in 2018 was 14.9 per cent higher than the previous year. Growth was driven by the ongoing implementation of some key projects including the St George's University Expansion Project, Silver Sands Resort (Phase One) and the Parliament Building (Phase One).”

The CDB said that the tourism sector expanded once more and that based on data for the first nine months of 2018, stay-over arrivals rose 10.3 per cent over the same period in 2017, with all major source markets supplying more customers.

Cruise ship passenger arrivals were an estimated 27.2 per cent higher than the same period in 2017. These developments enabled further growth in the hotel and restaurant sector, which also benefited from Grenada hosting several regional and international events, including the Grenada Invitational Athletics Meet, Dive Fest, Pure Grenada Music Festival, and SpiceMas, the CDB reported.

It said the private education and agriculture sectors produced mixed results. Private education, which constituted the largest share of GDP, estimated at 19.8 per cent in 2018, expanded by 4.3 per cent.

Manufacturing sector activity was up two per cent.

“However, data for the first six months of 2018 indicate a fall in agricultural production compared with the same period in 2017, which was attributed to adverse weather patterns affecting major crops such as nutmeg and cocoa.”

The CDB said that the financial system was stable, sound, and well capitalised in 2018.

“Notwithstanding, the sector is still challenged by poor credit supply. Based on data up to June 2018, domestic credit declined. The capital adequacy ratio also fell, from 13.8 per cent in 2017, to 13.1 per cent in September 2018; however, this remains comfortably above the regulatory requirement. Credit quality has improved markedly in recent years.”

The bank said that as at September 2018, the NPLs ratio was 2.6 per cent, which was below the five per cent prudential limit for the second successive year and represents the lowest figure recorded since June 2009. Liquid assets, as a percentage of total assets, increased by four percentage points to 44.9 per cent in the nine months to September 2018.

The current account deficit worsened in 2018, although international reserves remain adequate.

“The deficit widened to 7.4 per cent of GDP, relative to 6.7 per cent in 2017. Based on data up to June 2018, this deterioration reflected a growing trade deficit as a result of a faster growth in imports relative to exports. The expansion in imports was attributed to the increase in oil prices, as well as higher import demand. Exports were adversely impacted by poor performance in the agricultural sector. International reserves remained adequate, at 3.4 months as at end 2018,” the CDB said.


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