Here is the converted article in Markdown format:
Grenada’s Economy Faces Multiple Risks
St. George’s, Grenada - The Ministry of Finance has identified several risks that could impact Grenada’s economy in the short and medium term.
Macroeconomic Uncertainties
One of the main concerns is the potential disruption to fuel exports from Trinidad and Tobago, which could lead to short-term price increases and cost of production. This could have negative consequences for economic activity, particularly in the tourism sector, as Trinidad and Tobago accounted for 22% of Grenada’s total Caribbean tourist arrivals over the past decade.
Uncertainty Surrounding Grant Receipts
Another risk is the uncertainty surrounding grant receipts and inflows into the National Transformation Fund (NTF). The fund has historically received grants from traditional partners such as the European Union and Venezuela, but these inflows are expected to decline due to external factors. This could have a significant impact on the country’s fiscal outlook, making it essential for the government to exercise fiscal prudence and prioritize strategic capital investments.
Operations of State-Owned Enterprises
The operations of state-owned enterprises (SOEs) also pose risks to the economy, as they may fail to remain within their funding constraints or require calls on the central government’s resources. Additionally, pension reform and the implementation of the National Health Insurance scheme could pose significant risks to public finances if not properly managed.
Natural Disasters
Natural disasters are another inherent risk that Grenada faces, given its vulnerability to hurricanes, tropical storms, and flooding. The country has taken steps to strengthen its disaster risk financing framework and build resilience to natural hazards, but continued efforts are necessary to mitigate this risk.
Debt Sustainability Analysis
According to a Debt Sustainability Analysis carried out by the Ministry of Finance, Grenada’s public debt-to-GDP ratio is vulnerable to external shocks and requires careful management to ensure sustainability. The government has implemented reforms to build economic resilience and boost competitiveness, productivity, and growth, but ongoing challenges need to be addressed.
Risk Assessment Summary Table
| Risk Type | Risk Description | Source of Risk | Risk Rating | Measures to Manage/Mitigate Risks |
|---|---|---|---|---|
| Operational | Macroeconomic uncertainties, rising trade tensions and international oil prices | Petrotrin’s cessation of oil refining | Medium | Continue to implement reforms to build economic resilience, boost competitiveness, productivity, and growth. |
| Lower-than-expected NTF inflows and grants | High | Continue to exercise fiscal prudence to contain discretionary expenditure, prioritize strategic capital investments, and improve revenue administration and collection. | ||
| Capacity and institutional constraints affecting project implementation | Medium | Continuous capacity building in project management and greater coordination among implementing ministries should help mitigate this risk. | ||
| Cost associated with pension reform and NHI | High | The respective ongoing processes must be guided by the parameters of the Fiscal Responsibility Law to prevent any major fiscal fallout. | ||
| Operations of SOEs | Medium | Ensure that up-to-date audited financial statements are submitted in a timely manner and closely monitor management performance within the SOEs. | ||
| Other | Natural disasters (hurricanes, tropical storms, flooding) | High | Continue efforts to strengthen internal capacity to build resilience to natural hazards. |
Source: Ministry of Finance