Purchasing basic commodities, such as food, has been a big challenge for residents of Kiribati, Niue and Tuvalu, which are most affected by global inflation, according to the Asian Development Bank’s latest economic monitor report.
“The distance of these economies from markets and narrow production bases make them price takers but also increase their susceptibility to high transportation costs,” states the report prepared by Lily-Anne Homasi, Isoa Wainiqolo, Ana Isabel Jimenez and Jennifer Umlas.
Among the three island nations, Tuvalu experienced the highest consumer price hike at 31 percent by the end of 2023 compared to 2019, according to the authors.
Food prices in Tuvalu rose by 42 percent, according to ADB’s Pacific Economic Monitor released last week.
The authors attributed the inflation surge in Tuvalu to the implementation of sin taxes and high fuel prices resulting from Russia’s war in Ukraine and its impact on supply.
In Kiribati, inflation reached 25.1 percent year-on-year in January 2023 due to increased domestic demand, supply shortages, higher global commodity prices and rising freight costs, according to the authors.
Although inflation has since gone down by 2.1 percent resulting from the moderation of global commodity prices and improved supply-side conditions, Kiribati’s consumer price index has increased by 20 percent from 2019 to 2023.
“Movements in food prices explained more than 80 percent of overall price changes in 2020 and about 52 percent in 2022,” the report said.
The authors noted that the price movements made it harder for residents and visitors in Kiribati to afford nutritional food.
In Niue, consumer prices increased by about 20 percent from 2019 to 2023.
Food prices had risen by 28 percent at the end of 2023.
“This upward trend is attributed to the escalating prices of sheep and chicken meat,” the report said.
The authors noted that Kiribati, Niue and Tuvalu are susceptible to extreme weather events, including drought, cyclones, heavy rainfall and coastal flooding.
“The combination of high exposure to these disasters and limited capacity for disaster adaptation and mitigation exacerbates their impact on the population,” the report said.
“The small size of these economies and high transportation costs make them vulnerable to economic shocks, which can easily strain limited government resources,” it added.
Kiribati and Tuvalu, nevertheless, have managed to bounce back from the economic downturn experienced during the pandemic year.
Their recoveries were attributed to the resumption of infrastructure projects and fiscal stimulus, including social protection spending.
“A copra subsidy and unemployment benefits supported Kiribati household incomes and domestic consumption, while Tuvalu revived economic activity in construction, trade and hospitality,” the report said.
Niue’s economy, however, is still struggling to recover, with visitor arrivals remaining below pre-pandemic levels, the authors said.