Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review

GRENADA

The near term economic outlook is favourable. Real GDP growth is anticipated to be comparable to the level estimated in 2018. This forecast is on the basis that activity in the main economic sectors of construction, hotels and restaurants and education will remain strong. Inflationary pressures are likely to be subdued based on the forecast for lower oil prices on the global market in 2019. The merchandise trade deficit is forecasted to widen as imports increase to support demand in the construction sector as well as tourism activity. According to the 2019 Budget Estimates of Revenue and Expenditure, a smaller overall surplus of approximately 3.8 per cent of GDP is anticipated this year. Similarly, the primary surplus will also trend downwards to 6.0 per cent of GDP, but will nevertheless surpass the primary balance target of 3.5 per cent of GDP embedded in the Fiscal Responsibility Act (FRA). These forecasts are highly conditional on developments in the global economy, given its positive correlation with the Grenadian economy . In particular, threats to the outlook include: slower than anticipated global economic growth; natural disasters; and an unexpected surge in oil prices. Moreover,

there are a number of domestic challenges that could adversely impact the economic growth. These include: capacity constraints that could further slow the implementation of public sector capital projects; fiscal risks associated with ongoing pension reform and the introduction of a National Health Insurance Scheme; lower than projected receipts from the Citizenship by Investment Programme (CBI) and labour market challenges. These threats and challenges can be mitigated through the formulation and implementation of reforms to engender economic and infrastructure resilience; exercising fiscal prudence; and building capacity to enhance the management and implementation of capital projects. The successful management and mitigation of those risks could boost growth above the level recorded in 2018.

______________________________________________________________________________ 57 Eastern Caribbean Central Bank