Sustained increases in fishing license revenues have supported growth in gross domestic product (GDP) and solidified fiscal positions in Kiribati and other small island economies of the Pacific. These and other inflows are expected to boost growth in 2014. Inflation returned after Kiribati recorded deflation in 2012, but it is expected to track Australia’s relatively low rate. Windfall gains create opportunities for these small island economies to rebuild fiscal buffers to fund future service delivery.

Economic performance

Economic growth in 2013 in the small island economies of the Pacific was close to rates in the previous year and largely in line with forecasts. Growth reflected sustained revenue increases from fishing license fees and progress in the construction of major public infrastructure projects.

In Kiribati, GDP growth was 2.0%, slightly down from 2.5% in 2012 despite increases in fishing license revenues, because scheduled infrastructure projects - most notably road construction - suffered delays.

Revenues from fishing license fees continued their strong performance for a second consecutive year, with 2013 revenues exceeding budget projections by 62% in Kiribati. As a party to the Nauru Agreement, Kiribati has benefitted from rising rates under a vessel day scheme, wherein foreign fishing vessels are charged by the number of days they spend in the parties’ waters.

Selected Economic Indicators (%) - Kiribati 2014 2015
GDP Growth 3.0 2.0
Inflation 2.5 2.5
Current Account Balance (share of GDP) -36.2 -31.3

Source: ADB estimates.

Economic prospects

Infrastructure upgrades are expected to drive growth over the next 2 years. Kiribati’s economy is projected to grow by 3.0% in 2014 and 2.0% in 2015 as construction picks up on projects funded by development partners: upgrades of the airports at Tarawa and Kiritimati and of the South Tarawa Road, and the extension of Betio Port.

Source: ADB. 2014. Asian Development Outlook 2014. Manila.