Slower growth expected

PACIFIC Island countries should expect slower growth in 2024 and 2025, as the pandemic recovery bump fades and fiscal policies gradually tighten, according to the World Bank.
The World Bank Economic Update for the Pacific revealed that short-term risks have become more balanced since August 2023, with global commodity prices and inflation declining.
However, shifts in global economic growth, trade, and international tourism pose significant challenges to economic prospects and poverty reduction, risks that could heighten due to geopolitical tensions.
More than half of Pacific countries in the report are projected to see slower per capita growth than advanced economies, leading to widening income gaps and deteriorating prospects for poverty reduction.
The March 2024 Pacific Economic Update outlined the economic status of Pacific island countries, four years after the initial Covid-19 shock.
Growth decelerated to 5.5 per cent in 2023 after a historically high growth rate of 9.1 per cent in 2022, which was the first year of the recovery.
This moderation reflect a slow economic activity in Fiji, which accounts for more than half of the region’s output.
When Fiji is excluded, the remaining Pacific island countries experienced accelerated growth in 2023, after three years of contracted output.
Average inflation declined from a peak of 7.5 per cent in 2022 to 6.5 per cent in 2023, reflecting significant labour and supply shortages in tourism and remittances-led countries including Palau, Samoa, Tonga, and Vanuatu which were nations that have grappled with pressures on the cost of goods and services.
Debt levels generally improved, but public debt remained high in Fiji at 83 per cent.
Debt dynamics improved across Pacific island countries in 2023 due to a trend toward fiscal consolidation, coupled with a rebound in growth.
Public debt as a share of GDP decreased in eight of the Pacific island country economies, driven by economic recovery and enhanced government revenues.