Sustained increases in fishing license revenues have supported growth in gross domestic product (GDP) and solidified fiscal positions in Tuvalu and other small island economies of the Pacific. These and other inflows are expected to boost growth in 2014. 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.

Tuvalu saw progress in upgrading its airport, strong growth in fishing license revenues, and increased retail activity, which lifted growth to 1.1% from 0.2% in 2012.

Revenues from fishing license fees continued their strong performance for a second consecutive year, with 2013 revenues exceeding budget projections by 37% in Tuvalu. As a party to the Nauru Agreement, Tuvalu 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.

In addition to the revenue from fishing licenses, Tuvalu’s position improved with the collection of tax arrears from state-owned enterprises.

Selected Economic Indicators (%) - Tuvalu 2014 2015
GDP Growth 2.0 2.0
Inflation 2.5 2.0
Current Account Balance (share of GDP) -9.6 -10.5

Source: ADB estimates.

Economic prospects

Infrastructure upgrades are expected to drive growth over the next 2 years in the small island economies of the Pacific.

In Tuvalu, the airport upgrade and increased retail competition are seen to drive economic growth at 2.0% in both 2014 and 2015.

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