Regions and Countries

	Table of Contents
p. 2 of 19 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance: Sound Development Management E. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Cook Islands : I. Country Performance Assessment

---

A. Economic Performance Assessment

1. After three years of recession, the Cook Islands economy rebounded in 1999, despite a population decline from 17,400 in 1998, to around 15,000. Real gross domestic product (GDP) grew by an estimated 2.8 percent (see Appendix 1, page 1). The leading sector was tourism, with visitor arrivals up 6.5 percent on the 1998 level. Approximately one-third of the increase in arrivals was accounted for by Canadians taking advantage of charter flights. The introduction of new services by Air New Zealand underpinned an increase in visitors from Australia and New Zealand, and arrivals from Europe reached a record high. Black pearl production continued to grow; and commercial agricultural production - stimulated by tourism growth - recovered from the effects of drought. Construction activity, however, remained at the relatively low levels of recent years. Business surveys revealed a substantial rise in business confidence, which was reflected in growth in credit to the private sector, and a rise in foreign investment. The inflation rate rose to 1.4 percent, from 0.8 percent in 1998. The economy continued to grow in 2000.

2. The merchandise trade deficit fell to 46.3 percent of GDP in 1998 as imports declined and pearl exports grew by 66 percent. In 1999, growth in pearl exports offset import growth resulting from the economic recovery, and the trade deficit remained around 46 percent of GDP. Tourism receipts, official transfers, and private remittances substantially covered the trade account imbalance, leaving a current account deficit of approximately 7 percent of GDP.

3. Government finances strengthened in the fiscal year ending 30 June 1999. Operating and overall surpluses were recorded as operating expenditure was kept to the budgeted level and the revenue take came in above expectations. Development expenditure continued to hover around the NZ$10 million level of recent years. The debt servicing burden eased due to the September 1998 restructuring of the external debt: interest payments were a modest 12 percent of tax revenue, and the debt stock was equivalent to 78 percent of GDP. The 1999-2000 budget aimed at a balance on operating account, with revenue rising by 9 percent and operating expenditure by 15 percent (reflecting increased spending on education, health, welfare, cultural development, and environmental protection). Development expenditure was projected to rise to NZ$16 million as government increased spending on infrastructural assets to support tourism.

4. Implementation of the 1999-2000 budget was disrupted somewhat by a period of political instability in the latter half of 1999. However, a new coalition government took office in November, and quickly made a public commitment to continuation of the economic, public sector, and governance reform process begun in 1996. Six key strategies for improving fiscal governance were announced: to minimize red tape; to reduce government involvement in commercial activities; to improve the corporate governance of statutory authorities; to restructure some government corporations in order to increase their efficiency; to refocus the public administration on service delivery; and to increase reliance on local expertise.

5. Real GDP is forecast to grow by around 3 percent in 2000. Tourism is again predicted to be a driving force, with tourist arrivals forecast to increase by 6 percent; and production in the agriculture and fishing sector is forecast to rise by 6.6 percent.

Back I. Country Performance Assessment	Next B. Poverty Assessment