The World Bank’s Pacific Economic Update provides a twice-yearly assessment of 11 Pacific Island economies: the Federated States of Micronesia (FSM), Fiji, Kiribati, Nauru, Palau, Republic of the Marshall Islands (RMI), Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.
For Samoa, pre-pandemic GDP levels may not return in Samoa until 2025 due to the ongoing economic impact of the 2019 measles outbreak, a weaker tourism base before the pandemic, and prolonged border closures.
Samoa is forecast to return to growth in 2023, supported by the recovery in tourism and spillovers to other sectors and resumption of capital projects.
However, the country will continue to be challenged by the highest inflation in the region, reaching 10% in 2023 before easing in 2024. Greater capital expenditure and improved budget execution is expected to put pressure on fiscal balance, which is forecast to flip from surplus to deficit in 2023 as revenues and grants fall to normal levels.
The August 2023 Pacific Economic Update describes a return to growth for the region, largely due to the resumption of tourism, higher public investment, and construction.
In 2023, an average Gross Domestic Product (GDP) growth of 3.9% is projected for the Pacific region (excluding PNG), up from 2.0% in 2022. Growth is projected to slow to 3.3% in 2024 as the initial demand boost — particularly in tourism — dissipates.
However, risks are tilted to the downside amid fragile global economic conditions. While global conditions have gradually improved since the COVID-19 pandemic and Russia’s invasion of Ukraine, progress on reducing inflation in major economies has proven more challenging than expected.
This has resulted in persistently higher inflation in Pacific Island countries. Slower global growth in major trading partners may present headwinds to the Pacific’s recovery prospects, especially for countries highly dependent on tourism and remittances.
The new Pacific Economic Update also includes a particular analysis of international labour migration, an essential regional income source during the pandemic.
The report emphasizes a significant opportunity for Pacific countries to maximize their benefits.
