The Pacific Region to Grow Modestly in 2007, ADB Says

News Release | 27 March 2007

TOKYO, JAPAN - ADB's 14 Pacific developing member countries are forecast to grow by 4.5% in 2007 on the back of an acceleration in growth in Papua New Guinea and recovery in Timor-Leste, according to a major Asian Development Bank report released today.

The Pacific economies grew by 3.1 percent in 2006, picking up from 2.5% growth in 2005, says the 2007 edition of ADB's flagship annual economic publication, Asian Development Outlook (ADO).

"The challenge for most Pacific Islands governments is to encourage private sector-led and more self-reliant economies," says ADB Chief Economist Ifzal Ali.

ADO 2007 forecast growth for developing Asia and the Pacific of 7.6% in 2007 and 7.7% 2008.

Civil unrest in the Pacific region in 2006 will cast long shadows on regional economic growth for the coming years, ADO 2007 says. The underlying causes - including high levels of youth unemployment - in most cases remain to be addressed. The key to raising economic growth and generating employment in the region is structural reforms, sustainable fiscal policies, and prudent monetary policy.

The Fiji Islands achieved economic growth of 3.4% in 2006 on the back of a pick-up in sugar production, expansion in construction and growth in services stimulated by consumer demand. However, the Fijian economy faces difficult structural issues. The political situation in late 2006 has raised concerns over the impact on the economy, which is expected to contract this year, ADO 2007 says.

Papua New Guinea registered growth of 3.7% due to strong commodity prices and favorable supply responses from agriculture and mineral sectors, as well as sound fiscal and monetary policies. The economy has the potential to expand faster, but it needs to address law and order issues, strengthen infrastructure and ensure proper delivery of public services.

Timor-Leste's economic progress was dented by civil unrest in 2006. Non-oil GDP contracted by 1.6%. A sharp rebound is expected this year, supported by oil and gas revenue. The country has a sound development plan and donor support, but smooth execution of budget plans and maintenance of peace and stability will be essential to secure the future economic growth and development.

Palau, Samoa, Solomon Islands, and Vanuatu experienced relatively high growth of 4.6 to 5.7% in 2006. Tourism supported economic growth in Palau and Vanuatu.

Samoa's economic growth was underpinned by expansion in construction, services and public administration. Solomon Islands overcame the impact of civil unrest in April 2006, to post higher economic growth helped by increased log output, fisheries and palm oil production.

Republic of Marshall Islands and Tuvalu grew by 3% in 2006. For Marshall Islands this was below the population growth rate.

The Cook Islands and Tonga experienced disappointing growth rates of just 1.8% and 1.9%, respectively in 2006. Lower agricultural output and a decline in construction activity offset higher tourist arrivals and dragged down growth in Cook Islands. A slowdown in agriculture, forestry and fisheries, together with civil unrest in November, adversely impacted growth in Tonga.