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Caribbean Islands Sectoral Performance
Grenada's primary economic sectors competed directly with those
of other Caribbean islands. Major productive contributors to GDP
were tourism, agriculture, and manufacturing. Construction and
government services also played an important role.
Agriculture has traditionally been the largest revenue
producer; it accounted for 25 percent of GDP and 90 percent of
total merchandise exports in 1984. The main crops were cocoa,
bananas, nutmeg, and mace, all of which are tree crops and well
suited for the steep terrain. In the mid-1980s, farmers also
ventured into the cut flowers and fresh fruits markets to take
advantage of increased regional demand for these items,
particularly in Trinidad and Tobago and the United States.
Agricultural output actually fell in 1985 because of production
problems with traditional crops. These problems attested to
Grenada's inability to plan strategically. In this case, poor crop
performance coincided with strong markets for Grenada's traditional
exports. Many cocoa and banana plants had reached maturity in 1985
and required replanting, nutmeg was not effectively marketed, and
the mace crop fell victim to poor harvest techniques that lowered
production. These problems occurred at a time when the price of
nutmeg had risen 150 percent because the only other world producer,
Indonesia, was experiencing production problems. Had Grenada been
able to react to these market conditions, the strong world market
would have absorbed all of the country's banana and mace
production, enabling it to improve its GDP and balance of payments
position.
Government assistance and foreign aid were being directed to
the agricultural sector to address these problems. Expectations for
the late 1980s included sectoral growth approaching 5 percent, with
banana production returning to previous high output levels and
cocoa production coming on line after new plants reached
reproductive age. Immediate earnings would come from the
nontraditional crops.
After the overthrow of the revolutionary government in October
1983, tourism became the fastest growing sector of the economy. It
accounted for 7 percent of GDP and 46 percent of foreign exchange
earnings in 1985. It promised continued growth into the next
decade.
Completion of the international airport at Point Salines in
1985 launched the expansion of the tourist trade. Grenada enticed
major air carriers from Canada, the United States, and Western
Europe to make direct flights to Point Salines; however, hotel
capacity had not yet grown sufficiently to warrant a significant
increase in tourist traffic in such a short period of time.
Tourist statistics varied among different sources, but all
pointed to the growth trend in the 1980s. According to informed
observers, stay-over visitors increased 34 percent in 1985,
climbing to 39,000 tourists. Cruise ship passengers similarly
increased in 1985 to over 90,000, almost three times the number who
visited in 1984. Total receipts from tourism reached US$23.8
million in 1985.
Hotel capacity also expanded, but not quickly enough to meet
demand. By 1986 total capacity ranged between 500 and 600 rooms,
nearly double that available in 1983. An additional 900 rooms were
planned for the end of 1988; analysts suggested that this was not
a realistic completion date, however. The success of the tourist
trade in 1987 remained limited only by the lack of hotel
accommodations.
As of late 1987, manufacturing had not been a dynamic part of
the Grenadian economy; output stagnated after 1981, accounting for
only 5.8 percent of GDP in 1985. The structure and focus of this
sector largely explained its inability to grow. It stressed
production of locally used manufactured goods such as tobacco, food
products, garments, and building materials. This emphasis
encouraged the development of small, fragmented businesses that
were unable to take advantage of economies of scale (see Glossary)
and the export market. The garment industry was the only
manufacturing business that also produced for export, and it
accounted for only 3 percent of foreign exchange earnings in 1985.
The government hoped to change this trend by enticing foreign
investors with attractive investment and tax codes.
Shortages of skilled labor, managerial expertise, and proper
industrial infrastructure hindered development of the manufacturing
sector. For example, Grenada was unable to enter labor-intensive
manufacturing markets, such as assembly of electronic components,
as did many of its neighbors. In 1986 government programs were
created to address Grenada's infrastructural needs, and foreign
capital was being sought to finance start-up costs of local
businesses.
Data as of November 1987
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