Small economies, both sovereign and non-sovereign, have experienced several existential crises in recent years in the economic, social/health and environmental spheres. The long-standing growth paradigm of export-led growth driven by significant specialisation in offshore finance and tourism may no longer be sustainable. Economic activity and incomes in many small economies and non-sovereign territories were particularly adversely affected by the knock-on impacts of the global financial crisis of 2007/8, notably those heavily dependent upon tourism. A devastating series of hurricanes in the Caribbean 2017/18 led to the extensive destruction of infrastructure and livelihoods in the region. The onset of the Covid-19 pandemic in early 2020 and the consequent lock-down and collapse of international travel had further devastating effects on many tourism-dependent entities, in some ways similar to those of the earlier financial crisis.
The paper considers the long-term growth implications of these crises for small sovereign and non-sovereign economies in the light of critical major challenges to the twin pillars of their growth success over recent decades, tourism and financial services. Their high dependence upon tourism conflicts with increasing global concerns regarding global heating and the economic and environmental effects of long-haul and cruise tourism. Further, there is increasing regulatory pressure on offshore finance centres, notably from the OECD, for greater transparency and information exchange so as to substantially reduce tax evasion and money laundering. These issues represent existential challenges to the validity of the ‘traditional’ growth paradigm of small economies that has in the past delivered prosperity, but which can now no longer be guaranteed. The paper considers potential ways forward to identify a new growth paradigm to assure future growth and prosperity in these entities.