Economic growth in the Pacific region in 2009 is expected to dip below earlier forecasts, but will remain positive at 2.8%, says a new Asian Development Bank (ADB) publication released this week.
The situation remains bleak, however, for the majority Pacific Island economies. If the resource-rich nations of Papua New Guinea and Timor-Leste are excluded, then economic growth in the Pacific is forecast to contract by 0.4% this year.
The second issue of the Pacific Economic Monitor says five Pacific economies – Cook Islands, the Fiji Islands, Palau, Samoa, and Tonga – are projected to contract in 2009, due to weak tourism and remittances.
The Monitor is a quarterly review of 14 Pacific Island nations that provides an update of developments and policy issues in the region.
While the global economy is showing signs of stabilizing, the delayed impact on the Pacific from the economic downturn in the USA, Australia and New Zealand – the region’s major trading partner economies – may mean Pacific economies are yet to hit bottom.
The report says the speed of economic recovery will depend on the ability of the region’s governments to adjust to the economic deterioration.
“The economic and fiscal impacts of the global economic crisis appear to be larger than expected in some economies,” says S. Hafeez Rahman, Director General of ADB’s Pacific Department. “There is a strong case for concerted action to stabilize some of the region’s faltering economies and support reforms to achieve sustainable economic recovery.”
The recent recovery in the international prices of some key commodities, particularly crude oil, is helping to lift growth expectations in Papua New Guinea and Timor-Leste. Falling log prices will however yield zero growth for Solomon Islands in 2009.
Australian tourists are beginning to return to the Fiji Islands. This could slow tourism growth in the Cook Islands, Samoa, Tonga and Vanuatu for the rest of the year. Moderate growth in tourism is expected in all major Pacific tourist destinations in 2010.
During the first half of 2009, inflation eased across the Pacific, with the exception of the Fiji Islands, because of devaluation. However, the recent rise in crude oil prices may push up inflation in the remainder of the year.
Data was used from Australia, New Zealand, USA, and Asia to supplement data from the region and provide more up-to-date assessments and broader coverage of the Pacific economies