Pacific Countries is expected to return to positive growth this year, says ADB


After two years of recession caused by the coronavirus disease COVID-19 pandemic, the Pacific is expected to return to positive growth this year, according to the Asian Development Outlook for 2022 released last week.

The report says economies of ADB’s Pacific developing member countries contracted by 0.6 percent on average in 2021 as the COVID-19 pandemic continued to weigh down tourism and trade.

Growth in the Pacific is expected to resume at an average of 3.9 percent in 2022 and 5.4 percent in 2023.

Although most Pacific economies are projected to return to growth in 2022, led by the subregion’s tourism-dependent economies as borders reopen, economic contraction is seen to persist in Solomon Islands with COVID-19 community transmission in the first half of the year, as well as in Tonga due to the impacts of an undersea volcanic eruption and tsunami in January.

“Rising vaccination rates will help most of the economies of the Pacific recover from the effects of the pandemic by allowing the safe opening of borders and enabling a return to positive economic growth,” said ADB Director General for the Pacific Leah Gutierrez.

“This suggests the Pacific has turned a corner, and that is good news.

“Now is not the time to be complacent about the vaccine rollout. It is critical for all countries in the subregion to reach a high vaccine coverage.

“At the same time, efforts to wind back heightened COVID-19 response expenditures, attention to bringing down debt levels, and careful monitoring of inflationary pressures are needed to underpin sustainable and inclusive economic recovery.”

There is no clear sign of borders reopening in Samoa, growth in 2022 is expected to be tepid at 0.4 percent says the ADB outlook report. 

“Constrained by scarring in the tourism sector, only a slight increase in growth to 2.2% is projected for 2023.

“The biggest risk to the economic outlook would be an escalation in the community transmission of COVID-19 and a consequent delay in restoring tourism.” 

The report says Samoa, GDP is expected to contract by a further 7.7 percent in FY21, before recovering in FY22 and FY23.

Lower international tourism would cause GDP to contract by a further 9.5 percent in FY21. Additional negative effects on the construction sector, goods exports, remittances and commercial activity would also have a contractionary impact.

These effects would be partially offset by the effects of government stimulus packages, the efforts of the tourism industry to reorient toward domestic tourism and hospitality, and the reallocation of hospitality workers and assets toward other productive activities, including agriculture.

Fiscal deficits averaging 1.5 percent of GDP are projected over the period FY21 to FY23.

High global fuel prices due to the Russian invasion of Ukraine are compounding inflationary pressures in the Pacific through elevated transportation costs and rising prices of imports.

On average, inflation in the Pacific is projected to rise sharply to 5.9 percent in 2022, before easing to 4.7 percent in 2023. High inflation poses a risk to recovery by potentially constraining economic growth through reduced purchasing power and consumption spending.

The South Pacific economies of the Cook Islands, Niue, Samoa, and Tonga were, until recently, largely spared the health impacts from community transmission of COVID-19, which allowed time for near-universal vaccine coverage.

The report projects growth in the Cook Islands to be 9.1% in 2022 and 11.2 percent in 2023, supported by a vaccination rate of more than 96% of the eligible population and the acceleration of infrastructure projects to enhance readiness to receive tourists.ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.