MANILA, PHILIPPINES - Pacific economies remain relatively sheltered from global financial turmoil, with growth projections largely unchanged at the mid-year point, according to the latest Pacific Economic Monitor, released today by the Asian Development Bank (ADB).
Growth in the Pacific region is expected to run at 6.0% in 2012, but slow to 4.2% in 2013. The slowdown in 2013 is expected to be mainly due to lower growth in resource exporting countries that weigh most heavily in regional averages.
"Pacific economies are weathering persistent troubles in the eurozone, but they need to broaden and build resilience in their economies," said Xianbin Yao, Director General of the ADB's Pacific Department. "To support this agenda, ADB is continuing its efforts to assist Pacific economies in making long-term infrastructure investments and undertaking necessary policy reforms to achieve stronger and more inclusive growth in coming years."
Economic troubles in the eurozone continue to have only modest and indirect effects on Pacific economies, owing to the relatively greater importance of economic developments in Australia, Japan, New Zealand, and the United States in driving Pacific growth. While the eurozone crisis drags on, relatively stronger performance in these countries appears to be moderating the impact on Pacific economies.
Slowing growth in the People's Republic of China, however, is expected to have greater implications for the Pacific, mainly due to its strong ties with Australia, the main trading partner of many Pacific economies. The slowdown forecast for the Pacific in 2013 is expected mainly due to lower growth in resource exporting countries, such as Papua New Guinea (PNG), Solomon Islands and Timor-Leste, which weigh most heavily in regional averages.
The value of Pacific exports to Australia was 6.1% lower during the first five months of 2012 compared to the same period in 2011. This is because PNG's main exports to Australia - gold, mineral fuels, petroleum, and petroleum products - dropped by 10.0%, and PNG accounted for 90.8% of total Pacific exports to Australia in the first quarter of 2012. The value of Pacific exports to New Zealand in the first quarter of 2012 rose by 22.2% compared with the same period in 2011, due to rising import volumes of phosphate from Nauru and coffee from PNG.
Tourist arrivals in the Pacific have maintained modest growth during the first five months of 2012. Departures from Australia to major South Pacific destinations increased by 1.4% compared with the same period the prior year.
Inflation in the Pacific is projected to run at 6.3% in 2012 - a modestly lower level than predicted at the start of the year - due to continued easing in international commodity prices, particularly lower food prices. However, recent extreme weather in the US and India is leading some analysts to reevaluate forecasts for continued easing of food prices into next year.