Annual Economic and Financial Review -December 2018

2018 Annual Economic and Financial Review

GRENADA

to remain subdued in line the forecast for lower oil prices by the EIA, barring any sudden adverse shocks.

4.0 per cent salary increase to public officers, the final portion of the agreement negotiated with trade unions for the triennium 2017- 2019. This is expected to increase the wage bill by $10.3m. Additionally, public workers will also receive annual increments. Notwithstanding, these payments the wage bill is likely to remain within the FRL target of 9.0 per cent of GDP. Other increases in current expenditure will emanate from goods and services, interest payments and transfer and subsidies. The pace of implementation of the capital programme is expected to intensify, thus leading to a higher level of capital expenditure in 2019. This will be tempered by an increase in capital grants. There are a number of threats that could hinder the realization of the growth forecast. Chief among them is lower than anticipated global economic growth due to trade tensions, geopolitical conflicts, upward shocks to oil prices and uncertainties related to Brexit. Less buoyancy in the global economy due to those factors can adversely affect the demand for tourism services and goods. The country is also highly vulnerable to natural disasters in the form of hurricanes, droughts, floods and storms as well as volcanic activity. These disasters have the

The merchandise trade deficit is projected to widen as the importation of construction materials and other manufactured goods continue to trend upwards. The increase in imports payments will be partly offset by greater travel receipts. According to the 2019 Budget Estimates of Revenue and Expenditure, the central government is expected to record an overall surplus of 3.8 per cent of GDP and a primary surplus of 6.0 per cent of GDP. These balances are slightly below the performance obtained in 2018 but nevertheless the primary balance should surpass the target in the FRA of 3.5 per cent of GDP. The attainment of this primary surplus will support a further reduction in the central government debt level. Despite the announced 2.0 percentage points reduction in personal income tax and corporate tax, current revenue is expected to outperform the intake in 2018. This is on the basis of continued improvements in tax administration and a general uptick in economic activity. Current expenditure is also likely to increase due to the payment of a

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