IV.

Economy

Normally service industries dominate the economy of Montserrat. Tourism is of most importance, normally contributing 25 to 30 per cent of gross domestic product and annual earnings of about US$10 million. The island has taken advantage of improvements in telecommunications to become a data-processing and computing centre of regional significance. Financial services expanded rapidly during the 1980s, but a banking scandal in 1989 led to the closure of many offshore banks in the early 1990s; in 1994 there were 21 offshore banks on the island, compared with more than 340 just before the scandal broke. The manufacturing sector is also important, accounting for more than 80 per cent of the island’s exports. The assembly and export of electronic components is the main activity, but agricultural processing and the manufacture of garments, plastic bags, and leather goods is also significant. The construction sector is an important source of employment, accounting for some 17 per cent of the labour force. The agricultural sector was formerly the mainstay of the economy. Today, production is primarily for domestic consumption. Crops include potatoes, tomatoes, mangoes, limes, rice, and sea island cotton. Cattle, sheep, goats, and poultry are kept. The volcanic eruption has, however, made much of the farmland uncultivable.

Earnings from the service sector, combined with remittances from Montserratians living abroad, normally offset the island’s large trade imbalance—export earnings cover only one tenth of import costs. However, the continuing eruption of the Soufriere Hills Volcano has led to a decline in tourist arrivals that, combined with the costs of relocating almost two thirds of the population, has had a detrimental impact on the island’s finances, and economy generally. The government of the United Kingdom has agreed to provide funds to finance any evacuation and subsequent rehabilitation programmes.