Photo credit: World Bank / Denisa Maňásková, 2023
The World Bank has predicted that Pacific economies will return to growth this year after three years of economic contraction due to the COVID-19 pandemic. Stephen Ndegwa, the Country Director of Papua New Guinea and the Pacific, noted that "Pacific countries' economic prospects were clearly improving after three years of the Coronavirus (Covid-19) lockdown." Ndegwa further stated that "the Pacific is well placed to accelerate its post-Covid-19 economic recovery throughout this year." However, the report also cautioned that "fiscal balances, debt sustainability, and inflation will remain a concern."
The World Bank's Inaugural Pacific Economic Update report stated that "Pacific nations will have to consider reforms and policies to boost equitable growth and sustainable investments." The report predicted that "Palau and the Solomon Islands will see an 18 per cent and 2.3 per cent (slow growth) growth in Gross Domestic Product respectively on the back of a resurgent tourism industry." However, "the closure of borders from 2020 to 2022 during the Covid-19 pandemic has eased, but left a severe blow to the tourism-dependent economies of Fiji, Vanuatu, Samoa, Tonga, and Palau."
While "Pacific economies can expect growth this year," the region should prepare for shocks from inflation and global uncertainty. David Gould, the World Bank's lead economist for the Pacific, noted that "after being severely hit by the Covid-19 and tepid signs of recovery in 2022, Pacific economies can expect growth this year." Gould explained that "for example, in Fiji, after three years of economic contraction, growth in 2022 is estimated to have climbed to 15 per cent, yet output is expected to remain below the previous years until 2024."
Furthermore, the report highlighted that "Pacific Island countries have not been immune from the economic impacts of the war in Ukraine." The region has been dealt another shock as "rising global energy and food prices have strained Pacific budgets, added to inflation, and ultimately increased the cost of living for families across the region." Therefore, "Pacific nations will have to consider reforms and policies to boost equitable growth and sustainable investments," considering the challenges posed by the pandemic and other external factors.
As Stephen Ndegwa said, "Pacific countries' economic prospects are clearly improving, but we need to continue to take action to ensure that our economies can grow sustainably and equitably."
