Vanuatu remains on track to grow by 3.2% in 2013, as projected in the Asian Development Outlook (ADO) 2013 in April, as tourist arrivals and construction spending are both expected to continue to increase. The number of visitors from Australia - Vanuatu’s largest source market - increased by 8.3% in the first quarter of 2013 from the same period in 2012. Similarly, the 2014 growth outlook remains at 3.4%, also supported by greater construction spending and continued growth in tourist arrivals.
|Selected Economic Indicators (%) - Vanuatu||2013||2014|
|ADO 2013||Update||ADO 2013||Update|
|Current Account Balance (share of GDP)||-10.0||-10.0||-10.0||-10.0|
Source: Asian Development Outlook (ADO) 2013 Update; ADB estimates.
The effect on inflation from declining international food and fuel prices has been greater than projected in ADO 2013. In Vanuatu, inflation for 2013 is now projected to reach only 2.0%, down from 2.5% forecast in ADO 2013, as lower inflation was observed in the first quarter. The inflation forecast for 2014 is also revised down to 2.0% in light of projected declines in commodity prices.
The outlook for Vanuatu’s current account deficit remains at 10% of gross domestic product (GDP) in 2013 and 2014, in line with ADO 2013 forecasts. Rising domestic demand and new construction projects funded by development partners are expected to boost imports. At the same time, declines in export revenues are seen as likely to continue in 2013 as export volumes and prices for Vanuatu’s agricultural products remain weak. By March 2013, Vanuatu’s foreign reserves had declined to the equivalent of 6.7 months of import cover, down from 7.4 months in December 2012. Reduced inflows from development partners seem to have been the largest factor behind this decline.
Source: ADB. 2013. Asian Development Outlook 2013 Update. Manila.