by Dr Lawrence A Joseph
Perhaps the most significant economic indicator coming out from the recent budget presentation pertains to Grenada’s economic growth rate. The figures quoted, and which figures have much credibility as they have been overseen by the International Monetary Fund (IMF), were 2.35% in 2013 and 5.68% in 2014. Further, based upon the performance of the economy up to six weeks before the close of the financial year, the growth rate for the year 2015 was projected to be 5.15%. The growth rate for 2016 is projected to be 2.8%.
These rates of growth of the country’s economy in recent years are very much different from what Grenada experienced in 2011, when it was 0.76% and in 2012 when it was minus 1.16%. In fact, Grenada’s economy is growing at a faster rate than the average rate of growth in the Eastern Caribbean Currency Union (ECCU) which was 1.32% in 2013 and 3.69% in 2014. The global growth rate in 2014 was 3.4% and is projected to decline slightly to 3.1% in 2015. The average growth rate for the ECCU in 2015 is projected to be a mere 1.74%.
Economic growth refers to an increase in the capacity of a country’s economy to produce goods and services, which rate may be compared from one period of time to another. It can be measured in nominal terms which include inflation or in real terms which are adjusted for inflation. For example, before an adjustment was made for inflation in 2014, the nominal economic growth rate for Grenada was 8.2%, however after the relevant adjustment was made it was deflated to 2.35%. Inflation refers to the rate at which the general level of prices for goods and services are rising, vis a vis the purchasing power of the currency being used.
When economic growth is measured, it is conventionally done as the percentage rate of increase in the real Gross Domestic Product (GDP) which is the monetary value of all goods and services produced within a country’s borders. It is usually measured annually. It is a measure of “value added” to the economy. It is generally used to determine the economic performance and standard of living of a single country or region and also to make international comparisons. When an economy is growing it has the indirect potential to alleviate poverty as a result of a simultaneous increase in employment opportunities and increased labour productivity.
The main drivers of Grenada’s economy are very broad-based, which factor makes the economy less vulnerable than if there is a dependency on just one. The main pillars of Grenada’s economy are agriculture and fishing, tourism, construction and education services. Agricultural production accounted for 5% of GDP in 2014 with a 53.8% growth and is expected to maintain that level by the end of 2015. The tourism sector produced a growth rate in 2014 of 30.4% in 2014 and is expected to continue on the same upward trajectory in 2015. With regards to the construction industry, all indications are that the year 2015 would experience significant growth over 2014. The education sector accounted for 19.7% of GDP in 2014 at a growth rate of 4.5% with continuing positive growth expected in 2015. St George’s University is a major player in this area.
The presentation of the budget before the beginning of the fiscal year which begins on 1 January enables both government and the private sector to plan ahead. This was not always the case over the years. The national budget itself is the estimates of revenue and expenditure which the government of the day determines for the financial year. This is in keeping with section 77 of the Constitution, which gives the responsibility to the Minister for Finance to cause to be prepared and laid before Parliament the yearly estimates of revenues and expenditure. These estimates would have to be approved by the Standing Committee on Finance, sometimes called the Finance Committee, before presentation to Parliament. The Committee comprises all elected members of the House of Representatives and is chaired by the Minister for Finance.
The constant growth of Grenada’s economy in recent years, together with the projected growth of 2.8% for 2016, is very encouraging and would definitely attract more investor confidence. The recent trend in the economic growth rate is a good indicator regarding the creation of employment opportunities, the alleviation of poverty and having a more stabilized economy.
