Sustained increases in fishing license revenues have supported growth in gross domestic product (GDP) and solidified fiscal positions in Nauru and other small island economics of the Pacific. These and other inflows are expected to boost growth in 2014. Inflation returned after Nauru recorded deflation in 2012, but it is expected to track Australia’s relatively low rate. Windfall gains create opportunities for these 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 Nauru, Australian-financed construction related to the expansion of the Regional Processing Centre (RPC) for asylum seekers supported GDP growth at 4.5% in Fiscal Year 2013 (ended 30 June 2013). This was slightly slower than in 2012, mainly because phosphate production and exports declined.

Revenues from fishing license fees continued their strong performance for a second consecutive year, with 2013 revenues exceeding budget projections by 4% in Nauru. Parties to the Nauru agreement have 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.

In addition to the revenue from fishing licenses, higher income from visa fees and customs duty attributable to the RPC has boosted Nauru’s fiscal position.

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

... = data not available.
Source: ADB estimates.

Economic prospects

Infrastructure upgrades in the small island economies of the Pacific are expected to drive growth over the next 2 years. In Nauru, growth is projected at 10% in FY2014 and 8% in FY2015. This will reflect rebuilding and expansion the RPC and associated resettlement villages, higher government spending, and payments to landowners from the liquidation of the Nauru Phosphates Royalties Trust (NPRT).

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