Economic growth in the Federated States of Micronesia was subdued amid problems implementing capital projects under its compact of free association with the United States. Growth is seen to accelerate in the near term because of favorable external conditions and stimulus from infrastructure projects.
|Selected economic indicators (%) - Federated States of Micronesia||2015||2016|
|Current Account Balance (share of GDP)||11.2||6.4|
Source: ADB estimates.
In the Federated States of Micronesia (FSM), the release of Fiscal Year 2014 sector grants was delayed because the country had failed to update its plans to accommodate anticipated decreases in compact funding. The FSM economy contracted by 3.4% in FY2014 (ended 30 September 2014), extending the 4.0% contraction in the previous year. Domestic fisheries recovered, but the absence of demand connected with new construction kept industry and services in decline. Capital expenditure shrank by 57.9% in FY2014, while United States Compact capital grants plunged by 80.5%.
Progress in infrastructure project implementation is expected to stimulate the FSM economy. The resumption of the Airport Improvement Program with the renovation of the runway at Chuuk should help reverse the economic downturn and support growth at 2.3% in FY2015. Growth is projected to accelerate to 5.1% in FY2016 with scaled-up implementation of projects.
Excerpted from the Asian Development Outlook 2015.