Grenada - Economy

Grenada’s ranking on the World Bank’s Doing Business Indicator slipped from 130 in 2015 to 135 in 2016. However, while there have been positive attempts to improve the country’s business climate, public statements and actions have cast doubt on the inviolability of contracts, particularly in the utility sector, and most recently within the hotel and tourism industry. This will require careful scrutiny throughout 2017 pending final decisions.

The year 2016 saw revisions to several bills, and the launch of a new Government investment incentives regime. This new regime positively impacts the investment climate, ensuring transparency, equitable practices; adherence to the rule of law, and an established standard for potential investors to Grenada. The objective of the new regime is to streamline bureaucratic and legal processes which for years have been a huge challenge to the investment climate. While failed attempts were made at constitutional reform in 2016, the revisions made to key economic bills will serve to bolster the investment climate in Grenada. Some of these bills are: value added tax, property transfer tax, investment, excise tax, customs (service charge), and bankruptcy and insolvency bills.

There were notable investments throughout 2017 within the tourist and construction industries, particularly through the Citizenship by Investment Program. The construction of several five star resorts is currently underway along with the refurbishing of several tourist attractions--some of which are scheduled for completion by 2019. The most recent addition to Grenada’s fleet of hotels is the all-inclusive Sandals Luxury Resort. This resort has attracted an affluent clientele of repeat guests, several of which are interested in doing business in Grenada.

The economy of Grenada, based primarily upon services (tourism and education) and agricultural production (nutmeg and cocoa), was brought to a near standstill by Hurricane Ivan on September 7, 2004. Thirty-seven people were killed by the hurricane, and approximately 8,000-10,000 left homeless. Hurricane Ivan damaged or destroyed 90% of the buildings on the island, including some tourist facilities. Hurricane Emily swept over the island 10 months later, wreaking further havoc.

Overall damage totaled as much as 2.5 times annual GDP. Reconstruction proceeded quickly, with the United States as the leading donor, with an emergency program of about $45 million aimed at repairing and rebuilding schools, health clinics, community centers, and housing; training several thousand Grenadians in construction and other fields; providing grants to private businesses to speed their recovery; and providing a variety of aid to help Grenada diversify its agriculture and tourism sectors.

Despite initial high unemployment in the tourist and other sectors, urban Grenadians benefited post-hurricane from job opportunities in the construction sector. Agricultural workers did not fare as well. Hurricane Ivan destroyed or significantly damaged a large percentage of Grenada's tree crops, and Hurricane Emily further damaged the sector. The hurricanes exacerbated an ongoing exodus out of the rural areas to the country's cities and towns as young Grenadians increasingly chose not to farm.

Complete recovery would take years. Most hotels, restaurants, and other businesses reopened by 2007. In anticipation of the April 2007 Cricket World Cup matches held on the island, many Grenadians renewed their focus on the rebuilding process. Predictions for an increase in tourism were realized in part, although Grenada lags behind its neighbors in marketing the island abroad, particularly in the largely untapped U.S. market. St. George's University, a large American medical and veterinary school with about 3,700 graduate and undergraduate students, is in full operation.

Grenada is a member of the Eastern Caribbean Currency Union (ECCU). The Eastern Caribbean Central Bank (ECCB) issues a common currency for all members of the ECCU. The ECCB also manages monetary policy, and regulates and supervises commercial banking activities in its member countries.

Grenada is also a member of the Caribbean Community and Common Market (CARICOM). Most goods can be imported into Grenada under open general license, but some goods require specific licenses. Goods that are produced in the Eastern Caribbean receive additional protection; in May 1991, the CARICOM common external tariff (CET) was implemented. The CET aims to facilitate economic growth through intra-regional trade by offering duty-free trade among CARICOM members and duties on goods imported from outside CARICOM.

In the spring of 2008, due to dramatic increases in the costs of food and fuel, the government removed the CET from some essential items, including baby formula, yeast, and baking powder. The country suffered greatly from the global economic downturn, which reduced tourism arrivals. Although the country replanted many nutmeg trees, the lag between planting and bearing fruit has left Grenada with fewer resources than hoped. The government reintroduced the value added tax in 2010.