Economic and Financial Review - June 2019

June 2019 Economic and Financial Review GRENADA

Outlook The economic performance is forecasted to remain buoyant over the near-term, preliminary projections point to a 3.4 per cent expansion in GDP in 2019, from 3.5per cent in 2018. Growth is expected to be anchored largely by an improved performance of the tourism industry, with positive spill-over effects on the auxiliary sectors of wholesale and retail trade; transport, storage and communications and real estate renting and other business activities. The tourism industry will benefit from new and improved accommodation properties, along with intensified marketing of the destination, both regionally and internationally. These developments could be stymied by underperformance in the construction, agricultural and manufacturing sectors. In the public sector, construction work will include ongoing rehabilitation of roads, repairs to schools, work on climate adaptation projects as government sponsored housing projects. Private sector construction activity will focus primarily on the construction and refurbishing of hotels, including ongoing work on the Kimpton Kawana Bay Resort and residential construction. The outlook for agriculture and manufacturing is not promising amid

constraints to boosting production and exports. Inflationary pressures are likely rise towards the end of 2019, relative to the developments in the first half of the year, associated with recent geopolitical developments. In the external sector, the merchandise trade deficit is projected to widen in 2019, relative to the previous year, predicated largely on a downturn in exports coupled with an uptick in the level of imports. A possible temporary rise in global commodity prices, based on geo-political developments, could contribute to higher import payments Central government finances are expected to strengthen and register a larger overall surplus in 2019 relative to the previous year. Current revenue is expected to expand in line with projected economic growth and ongoing efforts to improve tax administration and collections. Prudent expenditure controls, as stipulated by the FRA are expected to maintain outlays within prescribed limits, resulting in healthy primary, current and overall surpluses. There are a number of risks that could materialize and further dampen economic growth. Key external risks include a more protracted deceleration in the global

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Eastern Caribbean Central Bank