A new report by ANZ Research says there are challenges ahead for six Pacific Island countries in sustaining the momentum of economic growth.
In the bank’s latest Pacific Economic Outlook, economists Kishti Sen and Tom Kenny suggest the outlook for Cook Islands, Kiribati, Samoa, Solomon Islands, Tonga, and Vanuatu, along with Timor-Leste, are likely to do “slightly better than their 2019 levels of production”.
But they caution that slower job growth, capacity constraints in the tourism sector, and subdued consumer demand are expected to moderate growth rates. They also anticipate that growth in overseas job placements “may be more restrained this year”. Remittances from such activity—plus tourism— drove consumer demand in these economies last year.
Additionally, the ANZ observes, governments in these countries are focusing on budget repair and prudent spending practices.
Despite these challenges, there are positive indicators for the future. Cook Islands, for instance, exceeded expectations in visitor arrivals in 2023, signaling a potential rebound in the tourism sector.
Similarly, Kiribati anticipates a boost in GDP with the construction of desalination plants, while Tonga is banking on remittances and green energy projects to support its economy.
Vanuatu, known for its contribution to seasonal labor programs in Australia and New Zealand, continues to benefit from overseas employment opportunities, providing a steady flow of remittances. The resurgence of the cruise ship tourism sector is expected to further bolster Vanuatu’s economy.
Timor-Leste, on the other hand, is eyeing significant economic growth potential with the development of the Greater Sunrise gas project, which could transform the nation into an upper-middle-income country.
While challenges persist, the authors say Pacific Island economies are demonstrating resilience and potential for growth, albeit with a need for prudent economic management and diversification strategies to navigate uncertainties effectively.
The report also underscores the importance of continued international cooperation and support to ensure sustainable economic development in the region.
