The International Monetary Fund (IMF) Executive Board has given Grenada a positive assessment in its Article IV consultation report.
The report, which was released on Tuesday, showed Grenada experienced positive economic growth despite recent challenges, including the impact of Hurricane Beryl in July 2024 which damaged over 16 per cent of the country’s gross domestic product.
According to the IMF, Grenada’s economy was bolstered by a thriving tourism sector, moderating inflation, and a narrowing current account deficit.
“A surge in Citizenship-by-Investment (CBI) revenue supported a strong improvement in the fiscal position and reduction in public debt. The financial system remained stable,” the IMF said in a statement.
Looking ahead, the IMF projects that Grenada’s near-term economic growth will remain robust at 3.9 percent in 2025.
This growth is expected to be supported by limited damage to tourism infrastructure and significant government spending on recovery efforts.
The country’s sizable government savings and disaster-contingent instruments are expected to provide fiscal space for these needs, while public debt is projected to continue its decline and meet the target of 60 per cent of GDP by 2030.
Over the medium term, however, GDP growth is anticipated to slow due to the tourism sector operating at near-peak capacity.
“Key downside risks include the threat of further natural disasters, potential shocks to tourism demand, and the uncertain scale of future CBI inflows, while the domestic non-bank financial system faces rising vulnerabilities from the continued rapid expansion of credit unions and the rising costs of property insurance. Prospective hotel developments and public investment projects represent upside risks to the medium-term growth outlook,” the IMF said.
The IMF’s Executive Directors praised the government’s for its timely and tailored response to Hurricane Beryl, which facilitated an environment to mitigate the impact on economic growth.
While expressing concern about the medium-term risks, including the volatility of CBI revenues and external shocks, the directors emphasised the need for continued fiscal prudence and structural reforms to foster long-term growth and resilience.
The directors highlighted the importance of returning to suspended fiscal rules and prioritising expenditure and revenue mobilisation to create fiscal space for future investments, including those related to climate resilience.
They also encouraged the development of a more uniform framework for managing CBI resources and resolving outstanding official arrears.
Regarding the financial sector, the IMF Directors said Grenada’s banking system is resilient, but there needs to be expanded oversight on expanding credit union sector.
The next Article IV Consultation with Grenada is expected to take place in 12 months.