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Economic growth in the Pacific is predicted to lag behind other emerging markets following the post-Covid boom caused by borders reopening.

The latest Pacific Economic Update report from the World Bank said growth decelerated to 5.5 per cent in 2023 after a historically high rate of 9.1 per cent in 2022.

The report includes 11 Pacific island economies of Federated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Palau, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

The strong post-Covid rebound can be largely attributed to Fiji which had 20 per cent growth and accounts to more than half of the region’s economic output. In 2023, Fiji’s growth rate slowed to 8 per cent and is now moving toward its medium-term trend of around 3 percent.

Excluding Fiji, the rest of the Pacific island nations experienced a rebound of 2.7 per cent in 2023, following three consecutive years of contractions.

In 2024 and 2025, Pacific island countries are anticipated to experience continued deceleration in growth to 3.5 per cent in 2024 and 3.3 per cent in 2025.

Reforms necessary

The report said excluding Fiji output in Pacific islands are only projected to surpass pre-pandemic levels in 2025, lagging behind many other emerging markets and developing economies, the report said.

World Bank senior economist and one of the authors of the report, Reshika Singh, said the slow growth is due to country specific factors like timing of borders reopening, flight disruptions and natural disasters.

“More than half of the countries that are covered by this report are projected to experience slower per capita growth than advanced economies and resulting in a widening income gap,” Singh said.

“Without fundamental reforms and continued international support, growth is expected to plateau at this lower rate amid a subdued investment outlook, and this is what we are worried about.”

Singh said Pacific nations in the report need to improve productivity.

“This would be including through investments in health, education, skills, and effective social protection programs, and also building quality infrastructure that is resilient to climate change.”

Source: RNZ Pacific