you're reading...
Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Palau, Papua New Guinea, Samoa, Solomon Islands, Timor Leste, Tonga, Vanuatu

In detail: The ADB’s outlook for the Pacific Islands

Economic growth in the Pacific region is expected to slow to 6.0% in 2012, decelerating further to 4.1% in 2013, while inflation is expected to hold at moderate levels in much of the Pacific, according to the Asian Development Outlook 2012.

Following is a more detailed breakdown of the economic performance and projections for the Pacific Island economies surveyed by the ADB.


Weak economic growth held back by policy uncertainty and structural constraints. Tourism performing well but sugar, textiles and other sectors are struggling to compete internationally.Public spending is limited by high levels of debt and structural reforms are needed for the economy to grow. Private investment is low and there has been little domestic lending.

Vital stats 2011:

  • Economic growth of 2.1%
  • Tourist arrivals of 6.8%
  • Gold output fell by 22%
  • Exports rose by 26.5%
  • Inflation averaged 8.7%
  • Budget deficit equivalent to 3.5% GDP

The outlook:

  • Predicted economic growth of 1% in 2012, 1.2% in 2013
  • Government budget deficit of 1.9% GDP in 2012

Papua New Guinea

High international commodity prices boosted economic growth in 2011. GDP growth will remain high in 2012 as construction of LNG project peaks. Economic pressures will emerge the following year. Ensuring the poor benefit from PNG’s high income is a major challenge. A rejuvenated public sector is needed to create a more diversified private sector.

Vital stats 2011:

  • GDP growth of 8.9%
  • Mining and oil sector contracted by 8.7%
  • Agriculture output rose 4.5%
  • 7.1% increase in formal employment Jan-June
  • Mineral exports up 17%
  • Agriculture exports up 51% (mainly due to palm oil, coffee, marine products)
  • Government budget deficit of $40 million (0.03% GDP)

The outlook:

  • Growth to moderate to 7.5% in 2012, 4.5% in 2013
  • Inflation  projected at 7% in 2012


Economic growth remains high, supported by  large increases in government expenditure. Inflation expected to remain high . The key economic challenge is to move into an economy where the private sector plays a key role. In July 2011, the country’s fourth commercial bank opened, the Banco Nacional Comercio de Timor-Leste. The economy will be influenced by national elections, temporary loss of capacity at Dili port, the final departure of the UN mission and spending on the national electrification program.

Vital stats 2011:

  • GDP expanded by 10% (excluding offshore petroleum sector and United Nations contributions)
  • Government expenditure reached $1.4 billion, an increase of 36.4% over 2010
  • Government capital spending more than doubled
  • Average inflation 13.1%
  • Lending levels rose by 18.5%
  • A large increase in imports
  • Non petroleum merchandise exports (mainly coffee) declined by 18.5%

The outlook:

  • Economic growth to slow from around 12% in 2012 to 8% in 2013
  • Government expenditure forecast to expand by 25.7% in 2012, and 10.3% in 2013
  • Inflation to remain high
  • Capital spending budgeted to rise to 100% of GDP

 Small Pacific Islands

The economies of all eleven small Pacific Island nations but Tonga, expanded in 2011. The growth in tourism continued and construction had an important influence on growth in many economies.

The outlook for these economies generally is positive and most are expected to grow at a faster rate in 2012 than last year.

Cook Islands

Tourism driving growth. A withholding tax to be introduced in 2012. Public sector reform to be introduced in a phased manner. The government needs to address the size of the public sector.

  • GDP growth of 3.4% (after several years of negative growth). GDP growth of 5.4% forecast for 2012, 3% in 2013
  • Expansion in tourism (due to improved economies of source markets) and fisheries
  • Inflation down to 0.6% in 2011


  • Economy grew 3% in 2011 due to stronger retail activity
  • Inflation 7.7%
  • Poor fishing season and decline in fishing license income led to decline in government revenue of about 20%
  • Expenditure rose by 10% (mainly due to infrastructure projects)
  • GDP forecast to rise by 3.5% in 2012 and 3% in 2013.
  • New government’s first budget due to be delivered this month
  • Concerns over the long-term financial sustainability of the Revenue Equalization Reserve Fund (a sovereign wealth fund, the earnings of which are intended to balance recurrent financing needs)

Marshall Islands

  • Economic growth slowed slightly to 5% in 2011. Supported by fishing activity, US military spending, upgrade of the Majuro international airport
  • Inflation rose by 9.5%. Projected to slow to 2.5% in 2012 and rise to 3% in 2013.
  • Domestic revenue (mainly through fishing licenses) rose
  • Economic growth forecast to rise to 5.4% in 2012, 2.6% in 2013
  • Marshall Islands needs to build up Compact Trust Fund to prepare for projected self-sufficiency in 2023, and pay down the government debt.
  • Fiscal and structural reforms are needed, tax reforms are necessary and cut backs in public expenditure are advised to improve the fiscal balance.

Federated States of Micronesia

  • Public infrastructure construction supported economic growth in 2011, but some projects reached their final stages.
  • GDP growth in 2011 was 1.4%
  • Inflation rose to 7.9%
  • Small budget surplus of about 0.4% of GDP, third consecutive year of surplus
  • Growth forecast at 1% in 2012, 0.5% in 2013, as infrastructure projects end
  • Inflation of 3.5% projected for 2012, 4% for 2013
  • Further fiscal consolidation required, and may require reduction in public sector wage bill, tax reforms


  • Economy grew by 4% in 2011 largely because of increased phosphate exports
  • CPI declined by 3.5%
  • Government revenue for 2012 projected at A$31.6 million. A small deficit is expected
  • Improved phosphate-loading facilities are expected to lift phosphate exports further
  • Economic growth forecast for 4.8% in 2012, 4.2% in 2013
  • Increase in Australian Official Development Assistance (ODA) anticipated


  • Economy grew 5.8% in 2011, slight increase on previous year
  • Reflects strong growth in tourism (about 50% of GDP). Asian arrivals rose steeply
  • Inflation rose to 2.1%
  • Government spending dropped by 3.1%
  • Tourism will remain key source of economic growth. Arrivals forecast to rise 7.5% in 2012 and 6% in 2013
  • Inflation projected to fall to 2%
  • Comprehensive civil service reform needed to reduce public sector wage bill
  • Tax reforms may be required


  • Growth was 2.1% in 2011, an  improvement on the previous year
  • Construction, tourism and remittances increased
  • Inflation rose to 2.9%
  • Fiscal deficit was 6.5% of GDP, lower than the budget estimate on the advice of the IMF
  • Central Bank continues to ease monetary policy
  • Current account deficit remained at 9.3% GDP
  • Export value fell due to weakening demand for fresh fish, beer and nonu juice
  • Economic growth of 2.5% and 2.4% expected in 2012, 2013 respectively
  • Prospects depend on how US, Australia and NZ economies perform
  • Continued efforts to advance fiscal consolidation and lower public debt required

Solomon Islands

  • Economy grew at 9.3%, the fastest of all Pacific Island countries
  • Major contributor was log production which was up around one-third on 2010
  • High international prices for other exports; palm oil, cocoa, copra, fish also contributed
  • Inflation jumped to 7.4%
  • Dollar appreciated vis-a-vis the US dollar by 8.7% in 2011
  • Budget surplus of 2.1% of GDP
  • Growth expected to moderate to 6% and 5% in 2012 and 2013 respectively
  • Reduced logging will be partly offset by increased gold production
  • 2012 budget is balanced
  • Private sector faces numerous challenges in doing business. Implementation of the State Owned Enterprise Act is essential. Infrastructure needs improvement.


  • Economy contracted by  0.3% in 2011 after growth of 0.3% in 2010
  • Remittances continue to decline
  • Tourism receipts grew by 14.8%
  • Inflation rose 6.1%
  • Revenue was 5.8% more than in 2010 but the budget deficit still widened to 7.9% of GDP
  • Fish and squash exports grew only 1.9% due to quarantine problems and bad weather
  • Economy forecast to show nearly zero growth in 2012 and 2013
  • Bleak outlook for remittances due to slow US economy and high unemployment in New Zealand
  • Critical that the government uses year-end cash surpluses, reprioritizes expenditure and raises the tax effort to build cash reserves


  • Economy grew by 1% mainly due to higher remittances
  • CPI increased by only 0.5%
  • Government spending fell by more than 7%
  • Weakly controlled spending on the Tuvalu Medical Treatment Scheme remains a heavy drain on the budget, with actual expenditure 70% over budget
  • Total government debt 44.3% of GDP
  • Growth expected to edge up to 1.4% in 2012 and 1.3% in 2013 supported by development partner funding of the airport and airfield
  • Increases in remittances projected
  • Fiscal situation remains precarious. With the likely exhaustion of the Consolidated Investment Fund (the vehicle by which budget deficits are financed) in 2012, development partners will become the primary avenue for budget financing


  • Growth nearly doubled to 4.3% in 2011
  • Strong agricultural exports (copra and cocoa), high international commodity prices, growth in construction
  • Tourist arrivals fell by 3.5%
  • CPI rose by 0.8%
  • Current account deficit steady at 5.9% of GDP
  • Economic growth of 4.5-5% is forecast for the next 2 years driven by increased construction, agricultural production and recovering tourism
  • Inflation forecast to increase as the economy grows to around 3-4%
  • Government needs to consider bringing in measures to broaden the tax base, such as progressive income tax

About Samantha Magick

Journalist and editor


No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s



Enter your email address to follow this blog and receive notifications of new posts by email.

%d bloggers like this: