Pacific Economies to Perform Slightly Better in 2010, says ADB

MANILA, PHILIPPINES - Building on improved prospects for the global economy, most Pacific island economies are expected to perform slightly better in 2010 than in 2009, according to a new Asian Development Bank (ADB) publication.

The first issue for 2010 of Pacific Economic Monitor, a quarterly economic review of 14 Pacific island countries and Timor-Leste, notes that the Pacific islands are expected to expand by 0.5% overall in 2010, after contracting by an estimated 1.4% in 2009.

Vanuatu is expected to remain the best performing Pacific island economy, bolstered by the benefits of recent improvements to its economic policy. Of all the Pacific island economies, only the Fiji Islands and Palau are expected to contract in 2010, an improvement from 2009 when five economies in the region contracted.

The small overall growth rate for the Pacific region (the Pacific islands, plus Papua New Guinea and Timor-Leste) is expected to rise slightly in 2010 to 3.7%, from 2.4% in 2009, largely driven by resource-rich Papua New Guinea and Timor-Leste.

The Monitor highlights that 2010 will provide an opportunity for these resource-rich countries to refine how they manage the large revenue flows from major resource projects.

The report says that many of the Pacific island governments are still feeling the impact of the economic slowdown on their tax revenue, so fiscal pressures remain. Those pressures are particularly intense in the Fiji Islands, Marshall Islands, Samoa, Solomon Islands and Tonga.

The ongoing adverse social impacts of the global economic crisis on vulnerable groups cannot be ignored. The Monitor says many families in the Pacific region are likely to bear costly and long-lasting effects as labor markets weaken and as smallholder incomes decline. It says that weak government revenues are adding to the risk faced by the vulnerable, because of the resulting pressure on the delivery of essential services.

“The working poor, those that have a job but earn too little to meet their basic needs, have been more exposed to the economic slowdown than others as construction, manufacturing and retail and wholesale activity weakened," said Cecile Gregory, Senior Advisor of ADB's Pacific Department. "Maintaining the delivery of social services should remain a priority, as this will help protect the vulnerable members of the community."

The Monitor notes that some Pacific island governments are already budgeting for higher social sector spending in 2010, but analysis shows that development partner support is needed to ensure the additional spending pushes through.

The Monitor provides an update of developments and policy issues in the region. The ADB publication uses data from Australia, New Zealand, US, and Asia to supplement data from the region to provide more up-to-date assessments and broader coverage of the Pacific island economies.