Smaller Pacific Economies Performing Well as Regional Growth Slows - ADB

Increased tourist arrivals, continued strong fisheries performance, and public infrastructure spending supported economic growth in several smaller Pacific island economies.

MANILA, PHILIPPINES – Growth in several of the smaller Pacific island economies is expected to accelerate in 2013 and 2014, despite softening growth in the Pacific region as a whole, according to the Asian Development Outlook 2013, released today by the Asian Development Bank (ADB).

The ADB report says that economic growth in the Pacific region slowed to 7.3% in 2012. Growth is expected to decelerate further to 5.2% in 2013, before a modest uptick to 5.5% in 2014. The slower growth was driven by developments in two of the region’s large resource exporting economies (Papua New Guinea and Solomon Islands). Inflation is projected to accelerate from 5.3% in 2012 to 6.1% in 2013, and rise even further to 6.3% in 2014, also as a result of developments in the larger resource exporting economies.

Increased tourist arrivals, continued strong fisheries performance, and public infrastructure spending supported economic growth in several smaller Pacific island economies. In the South Pacific, Cook Islands and Vanuatu saw strong growth in tourism receipts that pushed overall economic growth higher in 2012. Fiji’s economy grew more strongly in 2012 on the back of stronger tourism and other commercial activity. Samoa, another country with a sizeable tourism industry, also saw higher tourism revenues aided by discounted accommodation rates. Tonga’s aggressive tourism marketing campaign appears to have attracted more visitors, although overall growth continues to slow in the country.

“To promote strong growth, smaller Pacific island economies must work to improve their connectivity and attract private investment into their tourism, fishing, and other productive sectors,” said Xianbin Yao, Director General of ADB’s Pacific Department. “Tourism and fisheries have shown some capacity to support growth in even the smallest economies, contributing to both job creation and government revenues.”

The report shows that the economic outlook for the North Pacific will largely be determined by the schedule of infrastructure projects. The Marshall Islands economy is projected to grow by 2.3% in 2013 due to the stimulus effect of the ongoing airport upgrade and continued robust performance in its fisheries. In contrast, growth in the Federated States of Micronesia is expected to decline to about 1.0% as recent projects wrap up. Palau’s tourism arrivals continued to grow, albeit at a lower rate than in recent years, and continued to fuel economic growth.

Growth in the small island economies of Kiribati, Nauru, and Tuvalu is projected to accelerate in 2013 and 2014, largely due to planned construction activity and improving fisheries performance. Nauru’s economy will grow at an accelerated pace in 2013 and 2014 due to high phosphate exports and expanded operations at the asylum seekers regional processing center—which is expected to create about 200 new jobs in construction, restaurants, and retail trade.