There are some worrying signs ahead in the Grenadian economy with the Keith Mitchell-led New National Party (NNP) government being forced to drastically reduce the expected growth rate for the island in 2006.
³The Grenadian economy (Real GDP) is projected at 1.4 percent in 2006, down from earlier projections of 7.37 percent², the Ministry of Finance has said in a just released bulletin.
According to the document, this sharp downward revision in real Gross Domestic Product (GDP) growth reflects, in the main, a greater than expected decline in activities in the construction sector, associated with the shortage of construction materials (cement) during the earlier part of the year.
³The construction sector is projected to decline by 20 percent relative to 2005², it added.
Since the passages of Hurricanes Ivan and Emily in 2004 and 2005, the local economy has been driven by activities in the construction industry as Grenadians rebuild their battered homes.
Following are some of the highlights in the bulletin put out by the Ministry of Finance which is preparing the 2007 budget to be presented in parliament before year-end by Finance Minister, Anthony Boatswain:
Inflation (percent change, end of period) is expected to be 2.0 percent in 2006.
In 2007, real GDP growth in excess of 5.0 percent is targeted.
The increase in economic activity is associated with the hosting of Cricket World Cup as well as a resumption of growth in some of the major sectors.
For the first eight months of this year, revenue collections amounted to $236.8m, $2.9m higher when compared to the corresponding period in 2005.
On the other hand, recurrent expenditure at the end of August 2006 amounted to $207.6m, 9.4m higher than the same period in 2005.
It is estimated that by year-end, revenue collections will reach $367.7m, $8.0m higher than actual collections in 2005 while recurrent spending will reach $316.3m, $13.3m higher.
However, recurrent spending is likely to increase further if negotiations on wages and salaries increases are concluded and payments made before the end of the year.
In 2006, spending on capital projects and items is projected to remain high - in excess of $200.0m.
This high level of capital expenditure is associated with ongoing reconstruction activities and preparations for the 2007 Cricket World Cup.
Total grants received as at August 30, 2006 totaled 87.3m. This figure is expected to increase to $127.1m by year-end.
Some of the major donors are the People¹s Republic of China, CARICOM/Trinidad and the European Union (schools rehabilitation).
Implementation of the Reform Programme is underway and a number of initiatives have been completed or have started.
For example, on the fiscal side, a number of efforts aimed at increasing revenue collections have been undertaken.
GARFIN legislation has been enacted and ECCB on-site inspection of the health of the banking system has been completed.
However, there is much more to be done including reaching agreement on wages and salaries for 2006-2008, training of staff in assessing projects in excess of $5.0m, amending the Income Tax Act and conversion of GIDC in to a one-shop stop.
These measures are considered critical for the success of the programme and we are working assiduously to have them in place.
Reaching early agreement of the public sector wage bill is very critical for the preparation of the 2007 Budget.
Negotiations are ongoing between the Government Negotiating Team and the Trade Unions but further delays must be avoided at all cost.
The Government¹s proposal is to increase wages in line with the general increase in prices in the economy.
