The IMF recently completed its latest Article IV visit to Grenada. While an IMF IV visit is always important in and of itself, this year’s was particularly significant given the rapid economic growth seen across a number of key industries in the last few years, and what changes may lie ahead. Grenada’s recent strong economic performance is not only a testament to the nation’s economic policy, but also offers a window into where other Caribbean countries may seek to drive new growth. But Grenada’s economy isn’t perfect; just as recent years have seen solid success, a look at the horizon predicts a different landscape unfolding in the future.
Grenada Through the Years
With a population of just over 100,000 and a land area of 348 sq. km, Grenada is among the smaller independent nations in the region. Its history since the era of European arrival has regularly seen it at the epicentre of regional trends and events. Independence was gained from the UK in 1974. The 1983 killing of Maurice Bishop, who came to power in the Grenada Revolution of 1979, resulted in a subsequent invasion by the US, the nation’s rulers being deposed, and ensuing democratic elections. It is to this point in time that the beginning of Grenada’s modern economic chapter can be traced.
Modern Grenada
Since 1983 Washington and St George’s have had a close partnership, with joint efforts to combat drug trafficking, the island’s economic growth bolstered by the U.S. Agency for International Development, and the nation regularly drawing over 100,000 American tourists to its shores each year. This is in complement to tourism numbers across the board which have recently grown year on year, with over 528,000 in total arriving in 2018.
Alongside its strengths in tourism, Grenada’s economy has long been underwritten by the performance of its leading St George’s University as a major source of its foreign exchange, and as a key contributor to the nation’s GDP that has steadily grown over the past decade to today stand at over US$ 1bn annually.
In keeping with the country’s close links to the U.S. market, the university’s medical school, in particular, has built a strong identity as an option for students who, for varying reasons, choose to study medicine outside their native nation. St George’s offers an alternative pathway aimed at helping students secure the necessary medical licences for the U.S.
In so doing, the institution reaps the revenue of tuition costing each student around US$ 31,000 per term. The university has implemented a pioneering ‘pay it forward’ option for new applicants. Students are able to take initial classes to see if they can pass the grade and continue studies. Those who do not succeed are refunded their tuition for this initial stage. This is model that other educational institutions could follow.
Keeping Pace with CIPs
As well as tourism and education, Grenada has found new momentum with its Citizenship by Investment Programme, introduced in 2013. The programme’s popularity has brought on a surge in the construction sector. The IMF, however, expects a slowdown to be seen across the economy. This is worrying for advocates and critics alike of the construction boom, given that Grenada’s economic growth has not sufficiently countered the problem of high unemployment, sitting at 21.7% as of mid-2018.
With a slowdown in growth, new jobs will decline, and the unemployment figure could climb. The nature of a CIP means it will always be informed by global demand and, should another nation in the region produce a more enticing CIP, then suddenly this sector that’s been an economic jewel in Grenada’s crown could lose its lustre.
Broader Global Vulnerabilities
As the IMF identified, the vitality of Grenada’s tourism industry, like that of other Caribbean nations, is dependent upon its capacity to withstand the annual hurricane season. Beyond the unpredictability of Mother Nature, there are political vulnerabilities. In Grenada’s favour is the strong link it enjoys with the American tourism market and the stable political ties that Washington holds with St George’s.
It is generally accepted in international relations that strong ties between two countries usually withstand any one particular leader. In the case of Donald Trump, his greatest supporter and detractor alike would agree that he is a particularly unique U.S. president. He has been ‘consistently inconsistent’ in his approach to Latin America and the nuance of U.S. relations. President Trump’s readiness to do diplomacy via Twitter, and policy via executive order, means that any nation with strong links to the U.S. in tourism and education will have explored economic diversification as an insurance policy, and Grenada is no different.
The strong ties that Grenada has forged with the Russian government in recent years — seeing visa-free travel agreed between the two countries in 2017, and cultivation of Russian business via CIPs — is reflective of this diversification. The economic benefits of this are clear although it may create complications in the future with many of Grenada’s traditional allies.
Innovation and Reinvention
Grenadians should be proud of their nation and its economic achievements. The IMF IV visit acknowledged these feats, the chief concern being their continuance. The challenges that await Grenada are not insignificant but the country has created in tourism, education and its CIP, strong economic sectors that have delivered enviable growth in recent years. There is also optimism surrounding its renewable energy industry, with the announcement in 2018 of a UAE partnership that is expected to be a cornerstone of expansion in that sector.
Grenada’s progress required innovation in a crowded marketplace and competitive region. Success going forward will require reinvention once more. There are many hurdles that Grenadians must clear but, if they can achieve this, it could see the nation write the most exciting chapter yet in its economic history.
