Senior Economist Christopher Edmonds discusses the latest issue of the Pacific Economic Monitor, which shows downward momentum in some Pacific economies and explores the cost of climate change in the region.
Title: Pacific Economic Monitor: December 2013
Description: Senior Economist Christopher Edmonds discusses the latest issue of the Pacific Economic Monitor, which shows downward momentum in some Pacific economies and explores the cost of climate change in the region.
Senior Economist, Pacific Department
Asian Development Bank
The final issue of the PEM in December focuses on sort of fiscal outcomes on fiscal plans and this year, I guess one of the major transits that we see some of the larger resource exporting economies starting to struggle a bit. P and G being a notable case, you know, it’s a very large and important economy in the region. In an effort to try to counteract the effects of the slow down of economic growth in the country that governments have been using stimulus spending. At the same time, global commodity prices are falling, so government revenues are falling and that’s led to larger deficits.
In Timor-Leste, the country has enjoyed a very large fiscal surplus because of its revenues from the off-shore oil fields. These appeared to have peaked, so we might see some downturn on its level of surplus.
In Solomon Islands, we have some decline in timber exports, which is a major source of revenue for the government.
In Fiji, we have the government undertaking a major upscaling in its capital expenditure in an effort to develop its infrastructure. But we may see some pressure as next year’s election approaches, more pressure on government expenditures.
And I guess the last country I mentioned - Solomon Islands, again, some short term fiscal pressures as the government executes its efforts to recover from the typhoon of last year. At the same time, dealing with only short revenues.
Q: Are there any positive developments in the fiscal situation in the Pacific economies?
A: I’m pleased to report that we see improved fiscal performance in a number of the smaller islands countries, most notably, Kiribati, Republic of Marshall Islands, Nauru, and Tuvalu, where under the Nauru agreement they’ve been able to sort of regulate and raise the price of the fishing licenses that they charge for fishing in there tuna purse seine waters that’s led to a very positive fiscal situation for these countries.
In addition, a lot of the negative things that I was speaking about earlier, we actually see them as one off sort of events. For example in P and G again, we’re facing a short, fairly large deficits in the short term. But this is really attributable to the fact that the country has gone from having a large level of stimulus related to the construction of a LNG pipeline but LNG exports haven’t actually started yet and these are expected to come in next year. And we think that the fiscal situation in the country should improved with that development.
I guess the bigger issue with a lot of these countries is very low growth, that’s always the challenge. When growth is low, government revenues tend to be low.