The economic prospects are still bright for the Pacific region this year and next even as inflation ticks up, says Senior Economist, Christopher Edmonds.
Title: Pacific Economies Continue Strong
Description: The economic prospects are still bright for the Pacific region this year and next even as inflation ticks up, says Senior Economist, Christopher Edmonds.
Senior Economist, Pacific Department
Asian Development Bank
Q: How has the growth outlook for the Pacific region economies changed since the start of the year?
A: Now, we’re projecting that growth in 2013 in the Pacific region will be 5.0% which is a modest decline from the 5.2% that we had expected in the beginning of the year. The main factors behind these are the Solomon Islands is showing declining growth production, which comes on the back of already some decline in its timber production and exports. The other country that’s having a modest downgrade in its growth forecast is Timor-Leste, where low public expenditures particularly on capital infrastructure development are leading toward a moderation of our growth forecast for Timor-Leste.
Q: What is the outlook for inflation in the region?
A: We are now forecasting that inflation will run at about 5.7% in 2013, which is up from 5.3% in 2012. This is somewhat of a surprise given this slight moderation on the growth forecast and the global trend towards slight moderation in commodity prices and also the exchange rate movements, which should, in theory, be making imports cheaper for some of the countries in the region.
Q: What are the bright spots in this outlook?
A: Two economies in the region Fiji and Vanuatu are on the eve of achieving more than a decade of continuous growth, which is quite notable in this region where volatility tends to be very high because of the economic basis of the economy are limited so economic price shocks can really affect growth. And the region is also prone to natural disasters, which can also very adversely impact the economy, so, that’s a notable achievement. Timor-Leste again continues to grow at very high rate so we know we have a modest downgrade, it’s still a model economy in many respects with an enviable fiscal position because of all the resources that its holding in its petroleum fund. Lastly, the Fiji economy, although we’re holding our forecast study at 2.0% there are signs that both investment and consumptions are picking up amid greater certainty regarding the future political situation in the country. I would say that there’s upside risks to our forecast for Fiji and we’re just waiting for more data to support the reports we’re getting from the field before we upgrade the Fiji growth forecast.