Between the 1980s and the 2000s, the main thrust of Grenada's economy has shifted from agriculture to services, with tourism serving as the leading foreign currency earning sector.

Manufacturing industries in Grenada operate mostly on a small scale, including production of beverages and other foodstuffs, textiles, and the assembly of electronic components for export.

Economic conditions worsened when Hurricane Ivan hit the country in September 2004; progress in fiscal consolidation was impeded as government revenues fell and policy priorities was shifted to post-hurricane relief.

The economy of Grenada was brought to a near standstill in September 2004 by Hurricane Ivan, which damaged or destroyed 90 percent of the country's buildings, including some tourist facilities.

Besides the negative impacts to the tourism industry, the two devastating hurricanes destroyed or significantly damaged a large percentage of Grenada's tree crops, which may take years to recover.

Although signs of recovery have been seen in Grenada after the damage inflicted by Hurricanes Ivan and Emily, economic conditions remain difficult; GDP is projected at a growth rate of only one percent for 2005.

With the absence of sustained growth, the fiscal situation started to deteriorate after 2001, reflecting a continued expansionary policy with a sharp increase in spending on social sectors, the wage bill, and goods and services.

The fiscal situation remained shaky in 2002, with the deficit widening to 19.2 percent of GDP due to dampened output from Tropical Storm Lili.

Grenada's current account balance has remained in large deficit due to its heavy dependence on import of most consumer goods and domestic investment.

The current account deficits are financed by inflows of foreign direct investment, official grants and loans, and commercial borrowing by the private sector.

Grenada's economy is vulnerable to external shocks considering its high dependence on tourism, exports, and imports of most of the goods that are consumed or invested domestically.