The Washington-based International Monetary Fund (IMF) has once again given a good grade to the Keith Mitchell-led government in St. George’s for its handling of the Grenadian economy.
In its Article IV assessment of the island, the IMF in its report revealed that Grenada continues to have a strong economic growth and fiscal performance after completing the three years of the Structural Adjustment Programme (SAP).
The Article IV consultation is part of the fund’s usual surveillance done with member countries to assess their economic health and to give a prognosis for future financial problems.
The IMF team, led by Senior Economist, Bogdan Lissovolik was in Grenada from April 25 to May 8, 2019 to meet with government leader, private sector and Non-governmental Organisations.
Lissovolik, who engaged the media at a press conference at the Ministry of Finance Conference Room last Wednesday, noted that good economic growth and good fiscal performance is a good combination.
“We call it a virtuous circle, whereby the good output performance helps to improve the fiscal position, which in turn is anchored by the fiscal responsibility. We assess the estimate of GDP growth of 2018 was 4.2%, it was somewhat lower than the previous year, where it was about 5%. But it is still a number that is significantly higher than what we access, as long-term potential of Grenada, and also much higher than the long-term potential in the broader Caribbean region,” he said.
However, the IMF team leader cautioned on the high unemployment rate in the country.
He said: “The information that we have – it was about 22% in the middle of 2018. It’s important to continue the reforms that help generate sustainable jobs in part, because some of the elements that are feeding into the performance so far like construction, these are the elements that you cannot count on forever in terms of being very strong. It is important to rebalance and find other sustainable job opportunities.
“…The other element in the picture is the external situation where it says the current deficit, which is the external deficit, had about 11% of GDP. It is on the high side, it is particularly high, used to be higher for Grenada and other countries in the region, but since it is still double digit, we always ask in the IMF whether there are elements of sustainability or non-sustainability here and in this regard, we know the Citizenship by Investment Programme has enjoyed robust influence that supported the growth and both the financing of the external deficit, but also directly through construction projects. So, when you think about sustainability or growth obviously raise the sub issue of whether this element is going to be sustainable as well,” he added.
Lissovolik stated that a gradual ease of GDP growth is expected for Grenada in the road ahead but said there are possible risks.
“We think in 2019, GDP growth will be about 3 1/2% and over the medium term of the next few years growth will settle in the region of 3% and we think that the risks to the situation are two ways: you look at the external risks, there are mostly on the downside, not just for Grenada, but for the entire world. As far as Grenada’s specific risk picture is concerned, we see an upside potential but in case there is a possibility of upscale productive public spending, there are risks on the other side.
“There are in case spending would not be productive and efficient and in case the relationship can be in conflict with the Fiscal Responsibility Framework, there are some risks to the credibility of the framework if some of those perimeters are breached.