Grenada: Country and Foreign Investment
Economy and Currency
Grenada is sometimes known as the 'spice island'; cinnamon, cloves, ginger, mace, and especially nutmeg (represented on the national flag) are important exports.
Grenada now relies on tourism as its main source of foreign exchange, especially since the construction of an international airport in 1985. The development of an offshore financial industry has also contributed to growth in national output.
Economic progress was satisfactory until the setback of the 2004/2005 hurricanes. The category 4 Hurricane Ivan damaged or destroyed 90% of homes.
Grenada is recovering with remarkable speed, due to the climate, energetic domestic efforts and substantial international assistance.
Major short-term concerns are the rising fiscal deficit and the deterioration in the external account balance. Grenada shares a common central bank and a common currency (the East Caribbean Dollar) with seven other members of the Organisation of Eastern Caribbean States (OECS).
Minister of Finance Anthony Boatswain's 2005 budget included a 50% reduction in the tax payable on residential properties and a controversial levy on payrolls in order to establish a Grenada Reconstruction and Development Fund.
Presenting his budget for 2007 in December 2006, Boatswain predicted a 10% increase in revenues and a 6% fiscal surplus as a result of strengthened revenue collection techniques.
As a consequence of the hurricanes, real GDP growth fell to -1.7% in 2006, but rebounded to 4.3% in 2007 and 2.2% in 2008, reflecting a further strengthening of tourism, the initiation of several major tourism projects, and a gradual recovery of agriculture. However, Grenada was hit hard by the global financial crisis and growth contracted by -7.7% in 2009, with construction declining by more than 50%. A contraction of -1.4% was forecast for 2010. Agriculture grew by 8.25% compared to the previous year despite a severe drought on the island during the first half of 2010. Inflation has remained low, buttressed by the regional currency board arrangement. GDP per head was USD13,900 in 2012 (est.).
However, the IMF also noted in a report on the Grenadian economy in October 2007 that other structural reforms have suffered delays, including legislative action to reform the tax concessions regime, creating a one-stop shop for investors, strengthening the capacity to evaluate and prioritize capital projects, and modernizing the public sector.