ADB’s flagship annual economic publication, Asian Development Outlook 2009 said s the region will continue to grow overall in 2009 because of expansion in the large, resource rich nations.
Papua New Guinea and Timor-Leste are drawing on savings made from boom commodity prices to help support their economies during the global economic crisis. But most other Pacific nations will either contract or experience minimal expansion in 2009.
“There is no doubt the global economic crisis is impacting adversely on the Pacific economies, and the region has not yet felt the full force of these impacts,” said S. Hafeez Rahman, ADB’s director general of Pacific department.
Growth is expected to slow in Vanuatu in 2009 as the tourism sector softens, but to remain at a moderate level of 3.5 percent.
A contraction is expected in Fiji, Palau, Samoa and Tonga as tourism and remittances weaken. Special sporting events and large public projects are projected to see the tourism dependent Cook Islands avoid a contraction.
A reliance on stable external grants and draw-downs from public savings, which have reached unsustainable levels in some cases, is expected to support the economies of Federated States of Micronesia, Kiribati, Marshall Islands and Tuvalu. Growth will however remain low. Phosphate mining is projected to see Nauru achieve low economic growth in 2009.
“The Pacific can take action towards recovery from the crisis,” said Hafeez Rahman. “The best option is to adopt a short-term fiscal stimulus, where affordable and offering good value for money, by increasing government expenditure or possibly by reducing taxes. Care is nonetheless needed to avoid budget blowouts.”
High international commodity prices caused very high inflation for many of ADB’s 14 Pacific Developing Member Countries. In 2008 inflation averaged 9.6 percent across the region and peaked at 17.5 percent in the Marshall Islands.
The ADB Report said inflation will ease somewhat across the Pacific in 2009.
In Fiji, the economy recovered in 2008 to grow at 1.2 percent helped by an increase in visitor arrivals.
Solomon Islands economic growth of 6.4 percent in 2008 was largely due to the continuation of an unsustainably high rate of logging of native forests.
In 2008, tourism related activities helped support a relatively high growth rate of 6.3 percent in Vanuatu.
