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The Grenadian Economy – Is It Growing

Jul 17, 2015 07:41PM

Most Grenadians like pie – yam, sweet potato and macaroni.

The Grenadian economy is like a pie and consists of several sectors.  These include Agriculture, Tourism, Manufacturing, Construction and Education.

Each sector generates income and employment and if they export like Agriculture, Tourism and Education, they also generate foreign exchange.

The following pie chart illustrates the current composition of Grenada’s economy:

Figure I: 

Please note that Education refers primarily to services produced by St. George’s University.

In case, you are wondering about Tourism’s share of the national economic pie, it is estimated to be about 25 percent.

As you can see from the piechart above, Grenada’s has a fairly well-diversified economy.  This means

Every year, an assessment is done to determine if our local economy (economic pie) is growing and if so by how much.

The key measure used to assess economic growth is called Gross Domestic Product (GDP).  Simply defined, it is the total value of goods and services produced in a country in a specific period, usually one year.  The value of goods and services are derived from volume of goods and services multiplied by sales.

Whenever the economy is growing (POSITIVE), it indicates that local production of goods and services are improving due to increases in economic activity. Whereas, whenever the economy is contracting (NEGATIVE), it means that there is a general slowdown in the production of local goods and services as a result of a decline in economic activity.

To ensure the assessment is economic growth gives an accurate reading of actual production of goods and services not just sales, real GDP rather than nominal GDP is used.

What is the difference?  Inflation.  What is inflation, the change in the level of prices in the economy.

Real GDP then is the value of final goods and services produced in a given year when valued at constant prices. The first step in calculating real GDP is to calculate nominal GDP, which is the value of goods and services produced during a given year valued at the prices that prevailed in that same year. The basic difference between Real and Nominal GDP is the adjustment for changes in the price level (inflation).

We now provide you with the performance of Grenada’s economy over the past 10 years (2005-2014).

Figure 2

You will notice that Grenada’s economy grew after Hurricane Ivan due to reconstruction.  However, it slowed down in 2008 with the onset of Global Recession.  Grenada felt the full effect of this Great Recession between 2009 and 2012 when the economy declined for most of that period.

Since 2013, the Grenadian economy has been growing again.  In 2013, it grew by 3.2 percent.  While in 2014, it grew by 4.9 percent, one of best performances in the OECS.

Is the Grenadian economy growing?   Yes, the economy has started to grow and to show signs of recovery after 4 years of weak performance. The recovery has been stronger than anticipated and more robust than in the rest of the OECS with the exception of St Kitts and Nevis.

To sustain this progress, Grenada must continue current efforts to reduce debt and modernize the local economy as designed under the Homegrown Programme.

Together, Grenadians must work to grow our national economic pie even faster thereby providing a better standard of living for all Grenadians.

Next week, we will take a closer look at the issue of employment.

For comments or questions on this column, please send your email to financegrenada@gmail.com or call 435 0057.

You can also send a letter to the Permanent Secretary, Ministry of Finance.

Years

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

% Real Growth

12.49

4.38

6.28

1.69

(5.63)

(1.99)

0.14

(0.58)

3.18

4.85

 

 

 

                 Prepared by: Macro-Economic Policy Unit
                     Ministry of Finance & Energy
 

 

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