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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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