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Caribbean Islands Macroeconomic Overview
Aggregate economic production has increased steadily since
1983, a year in which there was an actual decline in gross domestic
product (GDP--see Glossary) of 2.9 percent. GDP rose by 2 percent
in 1984, 3.7 percent in 1985, and 4.3 percent in 1986. Continued
growth in GDP between 4 and 5 percent is expected through 1990,
provided the economy does not experience any major setbacks.
Many sectors of the economy contributed to the growth of GDP.
In 1985 government services accounted for 26.6 percent of GDP, the
largest share of aggregate output. Next came agriculture (16.3
percent), the wholesale and retail trade (15.5 percent),
construction (7.5 percent), hotels and restaurants (6.4 percent),
and manufacturing (5.8 percent).
Much of Grenada's new-found economic prosperity was attributed
to the completion of the international airport at Point Salines in
St. George's. In addition to boosting the construction sector, it
provided an airport to support the expanding tourist and export
trades. Manufacturing and agriculture, however, were also
important. Preliminary figures for 1986 suggested that
manufacturing actually grew for the first time since 1982, and
higher prices for agricultural products more than offset slight
declines in production. The rise in government services also
contributed to GDP figures, registering an increase of 11.2 percent
in 1985.
Government figures, although incomplete, indicated that there
was a concomitant rise in employment with increased production;
nearly 4,000 new jobs were created in 1986. Unemployment, however,
remained high, averaging between 20 and 25 percent in 1985, but it
was moving in a downward direction after peaking in 1984 at 28
percent. Government plans to reduce the public payroll by 1,500-
1,800 personnel--announced in 1987 but not yet implemented in late
1987--would further exacerbate the unemployment problem.
Agriculture was the largest employer, providing between 25 and 30
percent of all jobs.
The government was counting on the continuing structural
adjustment (see Glossary) in employment to absorb newly displaced
government workers, as well as many of the perpetually unemployed.
Tourism and manufacturing were expected to take on larger portions
of the work force. This adjustment actually began shortly after
World War II as the number of workers employed by the agricultural
sector began to decline. The manufacturing sector experienced
uneven growth after World War II; however, in 1986 it showed signs
of growth. Because of strong growth in tourism, the unemployment
burden was partially alleviated in 1986. Although the structural
change away from agriculture as the dominant employer was Grenada's
best hope for development, it did not guarantee relief from chronic
unemployment, which was the direct result of high birth rates and
long-term overpopulation.
Inflation was the only macroeconomic indicator that improved
throughout both the Bishop and the Blaize governments. The most
dramatic downward movements in consumer prices occurred after 1984.
Inflation as measured by the change in consumer prices remained the
same for 1980-81, at 10.6 percent. The index fell in 1982, with
prices rising only 6.9 percent; this dropped to 6.5 percent, 3.6
percent, and 1.8 percent for 1983, 1984, and 1985, respectively.
The government of Grenada recorded an actual decline of 0.8 percent
in the general price level for 1986.
Although the government took some credit for lower inflation
rates, the decline in food and fuel prices in 1985 was largely
responsible for the overall reduction in inflation. Although the
government was in a position to select fiscal and monetary policies
designed to minimize locally produced inflation, domestic prices
were very dependent on world inflation and the international prices
of Grenada's primary imports.
Data as of November 1987
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