The Economy of Montserrat

Montserrat

Montserrat is a British overseas territory located in the Leeward Islands, part of the chain of islands called the Lesser Antilles in the West Indies. This island measures approximately long and wide, giving of coastline...

was severely disrupted by volcanic activity which began in July 1995. Prior to this date, the small island country of 12,000 had an export economy based on agriculture, clothing, electronic parts and plants, with a per capita gross national product of USD 3,000 to 8,000. It had an international reputation as a tourist getaway, and the record producer George Martin

George Martin

Sir George Henry Martin CBE is an English record producer, arranger, composer and musician. He is sometimes referred to as "the Fifth Beatle"— a title that he often describes as "nonsense," but the fact remains that he served as producer on all but one of The Beatles' original albums...

 established an important recording studio there, Associated Independent Recording

Associated Independent Recording

Associated Independent Recording , an independent recording company, was founded in London in 1965 by Beatles producer George Martin and his partner John Burgess after their departure from EMI....

. Destroyed by Hurricane Hugo

Hurricane Hugo

Hurricane Hugo was a classical, destructive and rare Cape Verde-type hurricane which struck the Caribbean islands of Guadeloupe, Montserrat, St. Croix, Puerto Rico and the USA mainland in South Carolina as a Category 4 hurricane during September of the 1989 Atlantic hurricane season...

 in 1989, the studio was never reestablished; however Martin subsequently helped found the Montserrat Cultural Centre, which was opened in 2007. Some of the funds were raised in a London concert called "Music for Montserrat" (September 15, 1997).

Collapse

A catastrophic eruption of Soufrière Hills

Soufrière Hills

The Soufrière Hills volcano is an active complex stratovolcano with many lava domes forming its summit on the Caribbean island of Montserrat. After a long period of dormancy, it became active in 1995, and has continued to erupt ever since...

 in June 1997 closed the W. H. Bramble Airport

W. H. Bramble Airport

W.H. Bramble Airport, also known as Blackburne Airport, was a small international airport on the east coast of the island of Montserrat, a British Overseas Territory in the Caribbean....

 and seaport at Plymouth

Plymouth, Montserrat

Plymouth is the de jure capital of the island of Montserrat, an overseas territory of the United Kingdom located in the Leeward Island chain of the Lesser Antilles, West Indies. The town was overwhelmed by volcanic eruptions starting in the 1990s and was abandoned...

, causing further economic and social dislocation. Two-thirds of the inhabitants fled the island. Some began to return in 1998, but lack of housing limited the number.

The agriculture sector

Agriculture in Montserrat

Agriculture in Montserrat, a British Overseas Territory, is a small industry that is heavily influenced by the volcanic activity of the Soufrière Hills. Historically a major producer of sugar and tobacco, the eruptions of the Soufrière Hills between 1995 and 1997 severely damaged infrastructure...

 continued to be affected by the lack of suitable land for farming and the destruction of crops. Prospects for the economy depend largely on developments in relation to the volcano and on public sector construction activity. The UK launched a three-year $122.8 million aid program to help reconstruct the economy. Half of the island was expected to remain uninhabitable for another decade.

Today, Montserrat’s main economic activity is in construction and government services which together accounted for about 50 percent of GDP in 2000 when it was EC$76 million. In contrast, banking and insurance together accounted for less than 10 percent of GDP. The unemployment rate in 1998 was estimated at 6 percent. Montserrat’s domestic financial sector is very small and has seen a reduction in offshore finance in recent years with only 11 offshore bank

Offshore bank

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. These advantages typically include:...

s remaining. Real GDP declined from EC$122 million in 1995 to about EC$60 million in 1999, with the rate of decline peaking at -21.5 percent for 1996. The decline in economic activity reflected in large part the completion of major projects in both the private and public sectors. However, the rate of decline slowed markedly since 2000 and 2001, when GDP contracted by less than 3 percent. In 2002, the GDP growth rate reverted to a positive 4.6 percent reversing the declining trend over the past six years.

Year	Real GDP (factor cost)	% Change
1996	95.9	-21.5
1997	76.7	-20.0
1998	68.9	-8.6
1999	60.3	-12.5
2000	58.6	-2.8
2001	56.9	-2.9
2002	59.5	-4.6
2002	79.9 (2000 constant prices)	+3.3
2003	78.9	-0.9
2004	82.4	+4.5
2005	83.7	+1.5

New Town

The Montserrat Development Corporation, responsible for fostering private sector investment and development, has announced plans to develop the New Town

New Town

New Town may refer to:*New town, a generic name for a planned city development or expansion*In the United Kingdom, any of a specific set of towns created under various Acts of Parliament for population moved out of overcrowded conurbations-Places:...

 of Little Bay on the northwest coast of Montserrat between Brades

Brades

Brades is a village and de facto capital of the Caribbean island of Montserrat since 1998. Brades is located in the Carr's Bay/Little Bay vicinity at the northwest end of Montserrat. The official capital Plymouth in the south of the island has been abandoned since 1997 due to the eruption of...

 and Davy Hill

Davy Hill

Davy Hill is a settlement in the north of the Caribbean island of Montserrat, located close to the west coast near the narrowest point of the island on a saddle between the main bulk of the island's Centre Hills, and the peak of Silver Hill close to the island's northern tip. It is connected by...

. Slated for completion by 2020, the site will be the new focus of tourism, trade and housing and will also house the seat of government.