St Vincent and the Grenadines - Economy

Overview: St Vincent and the Grenadines has a relatively undeveloped economy, nevertheless providing a relatively high quality of life. It is vulnerable as the economic base is very small, and is heavily dependent on agriculture and especially bananas.

The main export crop, bananas, was sold to the EU under its preferential arrangements, but since these ended in 2007, Caribbean banana producers have faced a tougher competitive environment, and small, less efficient producers have moved out of banana production. The government has encouraged diversification into tourism, manufacturing, offshore finance and call centres, and has promoted growth of the private sector.

Economic growth fluctuates with agricultural output and prices on world markets and there are thus years of strong growth like 1995, and 1998 when growth was 5.7%, and years of weak growth like 2001, when the economy scarcely grew at all. The economy has, however, been prudently managed and inflation and debt have generally been relatively modest. From 2002, with new investment in tourism infrastructure, economic growth resumed confidently to 6.2% in 2004, 2.6% in 2005 and nearly 7% p.a. in 2006 and 2007.

Trade: The main export partners for bananas have been France and other EU countries, and the main source of imports is France.

From 2007, when the Cotonou Agreement between the European Union and the ACP grouping of developing countries came to an end, negotiations proceeded on a series of regional Economic Partnership Agreements, to replace the preferential trade agreements of the Cotonou Agreement with WTO-compliant free-trade areas.