Federated States of Micronesia: Economy
The gross domestic product (GDP) in the Federated States of Micronesia (FSM) contracted due to an absence of public investment. Recovery in the near term hinges on the country’s ability to access capital grants to fund major infrastructure projects.
|Selected economic indicators (%) – Federated States of Micronesia||2015||2016 Forecast||2017 Forecast|
|Current Account Balance (share of GDP)||17.2||19.5||30.1|
Source: Asian Development Outlook 2016
The lack of new projects in the FSM and other North Pacific economies reflects continued problems in utilizing capital grants flowing from the compacts of free association that they have with the United States. In addition, extreme weather exerted downward pressure on GDP growth.
Output in the FSM contracted for a fourth consecutive year, with GDP declining by an estimated 1.5% in Fiscal Year 2015 (ended 30 September 2015) following a series of devastating typhoons that affected all four of its states. In March 2015, Typhoon Maysak destroyed an estimated 90% of food crops and hundreds of homes in Chuuk and on outlying islands in Yap. In May, Typhoon Noul struck the main islands of Yap, and Typhoon Dolphin caused severe flooding and damage in Pohnpei and Kosrae. Private consumption fell by 3.1%. Construction contracted by 16.6% with the completion of several compact-funded infrastructure projects, and capacity constraints hindered pickup through reconstruction.
Growth in the FSM is forecast to reach 2.5% in FY2016 and 3.5% in FY2017 on expenditures from infrastructure grants connected to the compact agreement and on higher revenue from fishing licenses.
Read more from Asian Development Outlook 2016