Nauru: Economy

Growth forecasts for Nauru are unchanged from the Asian Development Outlook (ADO) 2014 projections in April.

Rising government revenues and increased consumer purchasing power from the liquidation of the Nauru Phosphates Royalties Trust and the distribution of proceeds to landowners suggest strong growth in Fiscal Year 2014 (ended 30 June 2014) and FY2015. Recurrent government expenditures have recently tracked rising revenues - mostly related to the regional processing center on Nauru for people seeking asylum in Australia. Government revenues in FY2014 excluding external grants are estimated at A$99.5 million, which is more than 3 times higher than before the reopening of the center in 2012.

Selected Economic Indicators (%) - Nauru 2014 2015
ADO 2014 Update ADO 2014 Update
GDP Growth 10.0 10.0 8.0 8.0
Inflation 5.0 5.0 7.0 7.0
Current Account Balance (share of GDP) -- -- -- --

-- = data not available

Source: ADB estimates.

To raise revenues, the Government of Nauru introduced an A$6,000 fee for a 1-year business visa in February 2014. Sustaining recent levels of recurrent expenditure may be a challenge once the center approaches full capacity and revenues plateau. To prepare for this, the government is working with development partners to establish a trust fund to be financed with revenues from the center and phosphate exports. The government has set aside A$5 million in its revised FY2014 budget as an initial contribution.

Inflation forecasts remain unchanged despite a weakening Australian dollar (the official currency). Inflation rose to 5.3% year on year in the first quarter of 2014 on price hikes for alcohol and tobacco. Payments to landowners following the liquidation of the Nauru Phosphates Royalties Trust are expected to increase incomes and intensify inflationary pressures.

Nauru does not report its balance of payments, but income from phosphate exports and inflows related to the regional processing center suggest a strengthening position.

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