Economic indicators suggest that gross domestic product (GDP) growth this year in the Federated States of Micronesia (FSM) remains on track to meet Asian Development Outlook (ADO) 2014 projections in April. As North Pacific economies, including FSM, are small and dominated by the public sector, economic performance generally tracks public capital expenditure.
|Selected economic indicators (%) - Federated States of Micronesia||2014||2015|
|ADO 2014||Update||ADO 2014||Update|
|Current Account Balance (share of GDP)||-9.6||-10.3||-9.3||-9.9|
Source: ADB estimates.
Economic growth in FSM is expected to remain sluggish at 0.5% in Fiscal Year 2014 (ends 30 September 2014), as forecast in ADO 2014. A lack of major public infrastructure projects, and weak private investment and business activity dim prospects for stronger growth in the near term. Unutilized funds from the United States under the Compact of Free Association for infrastructure projects reached over $140 million. Sluggish private sector growth is attributed to an unfavorable business environment. Attempts to improve this through tax reform have been delayed by opposition from two of the four states.
Relatively low and stable inflation is expected in FSM, in line with ADO 2014 forecasts, and expectations that international commodity prices will remain soft.
Despite higher food imports, the value of FSM's imports from the US fell by 23.0% year on year, mainly on a 42.0% drop in imports of machinery, transport equipment, and manufactured goods.
FSM's current account deficit is still expected to narrow on increases in fishing license revenue, albeit by slightly less than forecast previously.
Source: ADB. 2014. Asian Development Outlook 2014 Update. Manila.