Economic growth across the Pacific Islands is anticipated to decline to 3.6% this year, a drop from 5.8% in 2023, primarily due to a waning post-pandemic rebound and a significant slowdown in Fiji, which accounts for half of the region’s economic output, the World Bank reported on Tuesday.
The slowdown is attributed to weaker investment, escalating climate risks, and various structural challenges facing the region. The report warns that without urgent measures to boost investment, Pacific Island nations may face difficulties in alleviating poverty and creating new economic opportunities.
The Washington-based financial institution noted that investment has decreased on average across Pacific Island countries in seven of the last 15 years. In what it termed a “troubling outlook,” the World Bank projected that investment growth in 11 Pacific Island nations would hover around 1% annually during this decade, significantly below the 4.2% average growth rate recorded from 2000 to 2019.
Natural disasters pose a substantial economic burden, costing these nations an average of 1.5% of their gross domestic product (GDP) each year. Many Pacific Island countries struggle to cope with economic shocks resulting from cyclones and other disasters, often becoming trapped in a cycle of “construction, destruction, and repair.”
While some smaller Pacific Island nations reliant on tourism have experienced growth due to the return of visitors from Australia and New Zealand, Fiji’s economic growth is expected to slow to 3% in 2024. The country’s public debt is projected to reach 79% of GDP, one of the highest levels in the region and significantly higher than pre-pandemic figures.
Vanuatu is also facing economic challenges, as the liquidation of its national airline, Air Vanuatu, has severely impacted tourism and caused growth to plummet to 0.9%. The country has endured a decade of declining investment, according to the World Bank.
To stimulate growth, the report emphasizes the need for investment not only in sustainable tourism and agriculture but also in essential infrastructure such as ports, inter-island shipping, and digital connectivity. Despite possessing some of the largest maritime zones globally, Pacific Islands have struggled to fully exploit sustainable fishing, aquaculture, and marine biotechnology.
Furthermore, the World Bank highlighted the relatively high costs and poor speeds of internet connectivity in the region compared to global standards. Senior economist Dana Vorisek stressed the importance of addressing digital connectivity issues during a media briefing in Suva.
Officials also noted that reforms to payment systems and an increase in digital payment services are crucial for maximizing the impact of remittances sent home by overseas workers to their families.
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