Cook Islands: Economy

The Te Mato Vai Water Project boosted economic growth in the Cook Islands, though the effect is expected to wane in 2016 as the project nears completion.

Selected economic indicators (%) 2015 2016
  ADO 2015 Update ADO 2015 Update
GDP Growth 2.1 2.1 -0.3 -0.3
Inflation 1.3 2.4 1.4 1.4
Current Account Balance (share of GDP) ... ... ... ...

Source: ADB estimates.

Economic performance

In the Cook Islands, the Te Mato Vai Water Project boosted Gross Domestic Product growth.

Visitor arrivals from July 2014 to March 2015 dropped by 2.2% from a year earlier. Arrivals from Australia—the largest source market— declined by 9.0%, likely because of rising costs as the Australian dollar depreciated against the New Zealand dollar, which the Cook Islands uses as its currency. Arrivals from New Zealand grew slightly, reversing the contraction observed over the same period in financial year (FY) 2014.

To curb smoking and raise revenues, the government of the implemented the third of three tobacco tax hikes in July 2014. The combined effect of the hikes doubled the excise tax on tobacco. Higher prices for tobacco products, as well as higher import prices resulting from the depreciation of the New Zealand dollar, contributed to rising inflation in FY2015 slightly more than projected in Asian Development Outlook 2015.

Economic prospects

The Cook Islands economy is expected to contract in FY2016 as the Te Mato Vai Water Project nears completion. These forecasts are unchanged from ADO 2015.

Inflation forecast for FY2016 remains unchanged given global price trends and the absence of any new tax proposals or major change in government expenditures.

Excerpted from the Asian Development Outlook 2015 Update.