Above: Grenada (CJ Photo)

By the Caribbean Journal staff

Grenada’s economic outlook remains “stable,” according to ratings firm Standard & Poor’s, which affirmed its “B-” long-term foreign and local currency ratings on the country Tuesday.

S&P also raised its short-term ratings on Grenada to “B” from “C,” due to a revision of the firm’s criteria on the linkage between long-term and short-term ratings for sovereigns.

Grenada’s economy “continues to recover modestly,” the firm said, with projected economic growth of 1.5 percent in 2012. That will raise GDP per capita to $8,200, with annual inflation of 3 percent.

Part of that growth is coming from tourism, which saw a 7 percent increase in tourist arrivals in 2011, along with a doubling of nutmeg production.

“The risk of potential economic deterioration in the US or Europe — important sources of tourist revenues and foreign investment — would increase economic stress on the Grenadian economy,” said Standard & Poor’s credit analyst Kelli Bissett.

Several factors constrained the “B-” rating, however, including its “high net general government debt — expected to reach 80 percent of GDP this year — and the high external share of public debt, weak external liquidity, structurally high current account deficits, externally dependent economic growth prospects, and weak political institutions,” she said.

Risks to Grenada’s external debt also remain “high,” with its external debt net of liquid assets exceeding 200 percent of current account receipts, “a ratio that is higher than those of many Caribbean peers.”