Pacific Economic Trends

Comments: Economic growth virtually stopped in FY2002, reflecting a decline in visitor arrivals following the September 11 events. Medium-term forecasts, however, suggest that economic activity should improve, if the expected expansion in tourism, pearl exports and construction are realized.

Comments: The economy grew in FY2002, albeit more slowly than the past two years. Growth was supported by increased government spending using “bump-up” Compact funds. The consolidated fiscal position conceals the need for the national and all four state governments to make significant fiscal adjustments in view of lower Compact funding expected from FY2004. Growth is projected to pick up in FY2003.

Comments: Economic growth stayed on course in 2002 with tourism continuing to recover from the low of 2000, but with the sugar industry remaining depressed. Key issues that need to be resolved include the low levels of private investment, insecurity of land tenure and restructuring of the sugar industry. The outlook is for growth to continue in the medium term.

Comments: GDP growth accelerated in 2002, supported by consumer spending stemming from increases in public sector wages, pre-election government spending and employment at large development projects. The forecast is for growth to continue, but at a slower rate. A moderate relaxation of the country’s fiscal stance will help ensure this outcome.

Comments: The economy continued to recover in 2002 after a long period of weakness. It benefited both from a temporary boost in Compact funding and much lower debt service commitments. The outlook for 2003 is similar to the outcome for 2002, but prospects will be driven by the level and nature of future Compact funding.

Comments: The economy received support in 2002 from an Australian government financial assistance package, and in the near term, continued availability of external aid and political developments hold the key to the country’s prospects. Medium- to long-term growth potential will depend on major fiscal and structural changes in the economy.

Comments: Outside the mining and oil sectors, economic activity increased in 2002 as improved conditions in the agriculture sector, election campaigning and a relaxation of fiscal policy boosted consumer spending. Continued expansion will rest heavily on the government’s ability to reduce structural constraints and risks to macroeconomic stability.

Comments: Growth slowed sharply in 2002 as fishing, agriculture and construction contracted and impacted the rest of the economy through flow-on effects. Macroeconomic and structural policies are focused on supporting a resumption of annual economic growth to 2 - 4 percent. Maintaining macroeconomic stability and deepening reforms remain critical for the long-term sustainability of economic growth.

Comments: Lack of data constrains a credible analysis of future trends. The country is still suffering from the after-effects of the ethnic tension that erupted in mid-2000. The fiscal situation is desperate and quality of life has plummeted. Restoring the rule of law and achieving macroeconomic stability are the priorities to be tackled for the economy to recover.

Comments: The macroeconomic situation remained difficult in 2002, with fairly weak growth, a surge in inflation, and a deterioration in the fiscal position. However, the squash season was exceptional, remittances rose significantly and the government made progress in implementing its comprehensive Economic and Public Sector Reform Program. Prospects are for economic performance to improve somewhat over the next two years.

Comments: GDP growth slowed in 2002, reflecting a significant reduction in government expenditures from the levels of 2001. It was sustained by the finalization of public infrastructure projects and a strong housing market. Major policy issues include adjustment to lower levels of government revenues and spending, and the need for improved management.

Comments: The economy continued to suffer from recession in 2002, but modest recovery is projected over the medium term. The relatively high cost structure remains a factor in restraining growth and competitiveness of the tourism industry has declined in recent years with the appreciation of the real exchange rate. Consequently, renewed efforts are needed to implement the Comprehensive Reform Program.