Bob Lisale drinks coconut milk as he watches the king tides pound the coast of Funafuti Atoll, 19 February 2004, home to nearly half of Tuvalu's entire population of 11,500. Tuvaluans fear that global warming caused by greenhouse gas emissions, coupled with king tides and cyclones, will render their Polynesian archipelago uninhabitable. Photo: AFP PHOTO/Torsten BLACKWOOD
The Asian Development Bank (ADB) says tourism is expected to remain a key driver of growth in the Pacific.
The new Asian Development Outlook, released on Wednesday, said Developing Asia's 2024 growth forecast is raised slightly to 5 per cent and maintained at 4.9 per cent for 2025, with the growth forecast for the Pacific revised upward to 3.4 per cent - driven by the increase in tourist arrivals.
The area "Developing Asia" comprises the 46 members of the Asian Development Bank, including 14 Pacific states: the Cook Islands, Fiji, Kiribati, Marshall Islands, the Federated States of Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.
The Pacific is forecast to grow by 3.4 percent in 2024 and 4.1 percent in 2025, "yet limited fiscal space and high debt distress continue to exert pressure", the report said.
"The economic prospects of the Pacific are primarily determined by PNG and Fiji, collectively accounting for 90 per cent of the subregion's GDP.
Pacific gets a positive outlook from the ADB
"Growth in PNG will likely be slightly lower than projected in April for both 2024 and 2025, primarily due to lower output in the resource sector.
"However, this has been more than offset by higher-than-expected growth in other economies, notably Fiji, where robust tourist arrivals exceeded expectations and government expenditure was higher than forecast."
Projected 2024 GDP growth for PNG is now 3.2 percent, slightly lower than the April 2024 forecast of 3.3 percent. The revision is mainly due to reduced production of liquefied natural gas, gold, and nickel in the first half of 2024.
"Looking ahead, the recovery of businesses affected by the 10 January 2024 social unrest, coupled with the 2025 planned start-up of the multibillion-dollar Papua LNG project, will likely stimulate investment and economic growth.
"However, the subpar output in resource extraction continues to constrain growth."
In Fiji, visitor arrivals have been higher than forecast; "and with fiscal stimulus provided in 2024 also expected to support economic activity, the economy is estimated to grow by 3.4 percent in 2024 compared to the 3 percent estimated in ADO April 2024".
Business News for 26 September 2024
The report said growth in the Cook Islands, Kiribati, Nauru, Samoa, and Solomon Islands is now forecast higher than in April. In the Cooks, higher growth has been driven by tourism, while the increase in public wages in Kiribati had a substantially higher impact on domestic demand than had been predicted.
Reactivating the Regional Processing Centre led to Nauru's higher forecast, and growth in Samoa should be bolstered by sustained growth in tourism and remittances, while in Solomon Islands, the change reflects data revisions.
"In contrast, growth forecasts have fallen for Tonga in 2024, due to the impact of El Niño on agriculture, and Vanuatu, due to the adverse effects of the suspension of Air Vanuatu operations."
The ADB said challenges to future growth do persist in the region, including natural calamities and labour shortages, and the Pacific faces challenges emanating from limited fiscal space and debt distress.
Debt distress is defined by the International Monetary Fund as where a country is unable to fulfil its financial obligations and debt restructuring is required.
"Currently, seven of the 14 Pacific developing member countries are at high risk of debt distress - Kiribati, the Marshall Islands, PNG, Samoa, Tonga, Tuvalu, and Vanuatu," the ADB report said.
"The remaining seven are at moderate risk - the Cook Islands, Fiji, the Federated States of Micronesia, Nauru, Niue, Palau, and Solomon Islands."
Meanwhile, the ADB has signed a grant agreement with the Marshall Islands of US$52.5 million to support the improvement of urban services in Majuro and Ebeye.