North Pacific economies continued to expand in fiscal year 2012 (ended 30 September 2012 for all), but growth was generally more moderate than in previous years.
Government spending, including outlays related to elections, contributed to Palau’s 4.0% growth in gross domestic product (GDP) in FY2012, but tourism was the main driver. Visitor arrivals increased by 13.4%, building on the 25.8% growth achieved in FY2011 and marking the third consecutive year of such double-digit growth following 2 years of declining tourist arrivals
|Selected Economic Indicators (%) - Palau||2013||2014|
Current account balance
(share of GDP)
Source: ADB estimates.
Infrastructure development will remain a key driver of economic growth in the North Pacific, with construction providing short-term stimulus and the resulting capacity upgrades boosting longer-term prospects.
Because the growth outlook in Palau depends heavily on sustaining tourism’s robust performance, it may slow as the limited capacity of tourism-related facilities and infrastructure imposes constraints during peak periods, and as recent high rates of growth translate into market saturation. Given these constraints, GDP growth in Palau is expected to moderate to 3.0% in FY2013.
The start in FY2014 of ADB-supported projects to improve water and sanitation in Palau is expected to accelerate growth to 3.5%. Longer-term growth prospects are weighed down by outmigration, the lack of growth drivers from the private sector, and annual decrements in compact grants.
Source: ADB. 2013. Asian Development Outlook 2013. Manila.