After three decades of prosperity as a tourist centre, foreign debt, dependence on a single industry and relatively low growth in the early 1990s led to recession, despite attempts in the 1980s to diversify. An economic reform programme was agreed in 1994. But in 1995 Hurricane Luis severely damaged tourism at the same time as expenditure was increased to finance the recovery, and the economy contracted by five per cent.
The government introduced a tougher economic programme in 1996. This aimed to reduce debt and stimulate the private sector, including offshore financial activities, by cutting public expenditure, improving tax collection, undertaking privatisations and encouraging tourism and manufacturing of electronic components and household appliances for export; and clothes, food and beverages, furniture, paint and paper for the domestic market. Manufacturing production grew by at least four per cent p.a. during 2001–08.
The economy responded and there followed a period of good growth until 2000, when it slowed, due mainly to a fall in tourism. Growth recovered in 2003 and was vigorous until 2008 due mainly to increased construction activity in both public and private sectors. The economy remained vulnerable to natural disasters, shocks to tourist activity and volatile international oil prices, and from 2008 the global economic downturn and consequent sharp decline in tourism pushed the economy sharply into recession, shrinking by some 12 per cent in 2009, 7.1 per cent in 2010 and 1.8 per cent in 2011, then recovering from 2012. The economy grew by about two per cent in 2014.