Information about Asia and the Pacific Asia y el Pacífico
Chapter

Asia-Pacific Small States: Developments and Outlook

Author(s):
Shari Boyce, Sergei Dodzin, Ezequiel Cabezon, Fazurin Jamaludin, Yiqun Wu, and Rosanne Heller
Published Date:
August 2014
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Information about Asia and the Pacific Asia y el Pacífico
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Growth Developments

Recent economic performance in the APD small states was uneven in the first few months of 2014 (Figure 1).

Figure 1.APD Small States: Recent Economic Developments

Note: Asia and Pacific developing (APD) small states include: Bhutan, Fiji, Kiribati, Maldives, Marshall Islands, Micronesia, Palau, Samoa, Solomon Islands, Timor-Leste, Tonga, Tuvalu, and Vanuatu.

Sources: Country authorities; EM-DAT International Disaster Database; and IMF staff estimates.

Sources: Country authorities; and IMF staff estimates.

  • Most tourism-oriented economies experienced a robust increase in arrivals, partly reflecting such country-specific factors such as the resumption of direct flights to Palau from emerging Asia and postcyclone recovery in Fiji and Samoa, as well as regional trends such as a steady increase in tourist arrivals from Asia (especially China) in Fiji and Maldives. Fiji is preparing for a return to a democratically elected government and the run-up to the elections has contributed to increased confidence in the economy.

  • But natural disasters hit four APD small states in the first few months of 2014 (see Special Topic): Tonga and Fiji in January (Cyclone Ian); Vanuatu in March (Cyclone Lusi); and Solomon Islands in April (flash floods). These have undermined short-term growth to different degrees as noted in the country notes on Solomon Islands and Tonga.

  • Among commodity exporters (Bhutan, Solomon Islands, and Timor-Leste) and other APD small states, growth remains uneven: robust activity in Bhutan was driven mainly by hydropower-related construction activities; Solomon Islands experienced a continuing decline of logging stocks and a short-term disruption of gold production; and Timor-Leste’s ongoing depletion of oil reserves has led to a tighter budget constraint and lower government spending in the non-oil sector. In the other small states, growth is being supported by externally financed infrastructure projects. In Tuvalu, for example, donor-financed energy projects are supporting outer island development, and a large airport and road rehabilitation projects are expected to bring foreign investments of about 40 percent of GDP in the medium term.

Outlook

  • In 2014, growth in APD small states is expected to pick up slightly to about 2½ percent. However, the small Pacific island countries on average will continue to underperform other small states in other regions.

  • Investment in infrastructure and steady growth in emerging Asia, Australia, and New Zealand will underpin APD small states’ short- and medium-term performance. APD small states urgently need structural reforms to bridge infrastructure gaps, strengthen productivity, and lift potential growth. In the near term, elections on September 17 in Fiji and later this year in Solomon Islands, introduce some uncertainty to the outlook.

APD Small States: Real GDP Growth(Year-on-year percent change)
2012201320142015
Est.Proj.Proj.
Bhutan6.55.06.47.6
Fiji1.73.63.82.5
Kiribati2.82.93.02.7
Marshall Islands3.20.83.21.7
Maldives0.93.74.24.5
Micronesia0.40.60.60.6
Palau5.5−0.21.82.2
Samoa2.9−0.31.61.9
Solomon Islands3.83.00.13.5
Timor-Leste17.75.46.66.8
Tonga0.70.31.43.4
Tuvalu0.21.32.22.5
Vanuatu1.82.83.54.5
APD small states22.52.02.63.1
Small Pacific Island Countries22.31.52.12.5
Small states (excl. APD)21.72.22.73.0

Non-oil GDP.

Simple average.

Sources: IMF, World Economic Outlook database; IMF staff reports; and IMF, staff estimates and projections. Data for Bhutan, Micronesia, the Marshall Islands, Palau, Samoa, and Tonga are reported on a fiscal year basis.

Non-oil GDP.

Simple average.

Sources: IMF, World Economic Outlook database; IMF staff reports; and IMF, staff estimates and projections. Data for Bhutan, Micronesia, the Marshall Islands, Palau, Samoa, and Tonga are reported on a fiscal year basis.

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