The economy of Grenada (the ‘spice island’) is based on agriculture, notably nutmeg and mace, and tourism. Consequently it has an outward-looking and open economy, and enjoyed strong growth during the 1990s, even though the world market for spices was sluggish during most of the decade and tourism became increasingly competitive. Grenada is nonetheless vulnerable, its economy being so small, and high public expenditure has brought fiscal difficulties.
An IMF-backed economic adjustment programme was put in place in the 1990s, with fiscal reform, privatisation and staff reductions in the public sector to reduce the deficit, and improve the debt position. The government has encouraged development of industry to broaden the country’s economic base, but Grenada’s small scale and high costs hinder progress.
A small offshore sector was established in the 1990s, including internet gaming companies, but it failed to flourish in the 2000s. A US university, St George’s University, with 800 mainly North American students, also brings in substantial foreign exchange.
After three years of strong growth, the economy stalled in 2001, reflecting the US economic downturn and fall in tourism, only picking up again in 2003. In September 2004 Grenada was devastated by Hurricane Ivan and the economy stalled again. Growth of more than ten per cent in 2005 was followed by shrinkage of 1.9 per cent in 2006, resuming strongly positive in 2007–08. However, global recession then caused a sharp fall in tourism and the economy shrank by 6.6 per cent in 2009, recovering weakly in 2010–15.