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Grenada - Economy

KEY FACTS 2006

  • GNI: US$478m
  • GNI pc: US$4,420
  • GDP GROWTH: 2.6% p.a. 2002–06
  • Inflation: 2.2% p.a. 2002–06
  • Aid: 10.2% of GNI (2005)
  • External debt PV: US$422m (2005)

Overview: The economy of Grenada (the ‘spice island’) is based on agriculture, notably nutmeg and mace, and tourism. Consequently it has an outward-looking and open economy, and enjoyed strong growth during the 1990s, even though the world market for spices was sluggish during most of the decade and tourism became increasingly competitive. Grenada is nonetheless vulnerable, its economy being so small, and high public expenditure has brought fiscal difficulties.

An IMF-backed economic adjustment programme was put in place in the 1990s, with fiscal reform, privatisation and staff reductions in the public sector to reduce the deficit, and improve the debt position. The government has encouraged development of industry to broaden the country’s economic base, but Grenada’s small scale and high costs hinder progress.

A small offshore sector was established in the 1990s including internet gaming companies, but it failed to flourish in the 2000s. A US university, St George’s University, with 800 mainly North American students, also brings in substantial foreign exchange.

After three years of strong growth, the economy stalled in 2001, reflecting the US economic downturn and fall in tourism, only picking up again in 2003 with growth of 5.8% and continuing low inflation, until September 2004 when Grenada was devastated by Hurricane Ivan and the economy stalled again, shrinking by 3% during 2004. Growth resumed at 1.5% in 2005 with 6% inflation due to higher fuel prices.

Trade: Main exports are manufactured goods, bananas, nutmeg, mace and cocoa, the main markets being the USA, Germany, Netherlands and St Lucia. Main imports are capital goods, chemicals and fuels, the main sources being the USA and Trinidad and Tobago.

Tourism: Grenada is well placed for tourism, having beautiful mountain scenery, both beaches and a rugged coast, an extensive rainforest, yachting and water-sports facilities, a port that can accommodate cruiseships and several modern hotels. There are several national parks and eco-tourism is being promoted.