Pacific Economic Monitor: December 2015 - Budget Analysis

Expectations of faster global growth in 2015 failed to materialize due to lower-than-projected expansion in the People’s Republic of China, Japan, and the United States (US). The consensus global growth forecast is now at 3.1% in 2015—down from 3.7%. This is projected to strengthen to 3.6% in 2016—below the start of year forecast (4.0%). Risks to this outlook include possible oil price shocks from conflicts in Syria and financial disruptions that may be triggered by monetary tightening in the US.

Highlights

Highlights from this issue of the Pacific Economic Monitor include the following:

• Larger Pacific economies experiencing fiscal crunch. Weak energy export revenues in Papua New Guinea (PNG), and delays in Fiji’s public asset sales restrain planned expenditures in the near term. Petroleum revenues are steadily declining in Timor-Leste, requiring medium-term adjustment to a sustainable fiscal path. In Fiji, PNG, Solomon Islands, Tonga, and Vanuatu, extreme weather conditions related to El Niño are exerting economic and fiscal pressures.
• Windfall-financed increases in public spending for smaller economies. Continued rises in fishing license fees have boosted fiscal resources of smaller island economies, including Kiribati, Nauru, Palau, and Tuvalu. El Niño is expected to lead to transitory increases in tuna stocks, and any additional revenues will need to be managed carefully to safeguard long term fiscal sustainability.
• Tourism trends and opportunities. Policy briefs in this issue discuss the drivers of strong demand for tourism in the Pacific and the challenges to growth (e.g., lack of infrastructure, human resources, destination development, airline links, and visa restrictions). Measures to ensure tourism develops in an inclusive and environmentally sustainable manner are also explored.

About the Pacific Economic Monitor

The Pacific Economic Monitor provides an update of developments in Pacific economies and explores topical policy issues. This tri-annual publication is produced by ADB with contributions from development partners and knowledge organizations engaged in economic analysis of the Pacific.