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Fiji developments have knock-on effect on the region: ADB

01 April 2014

While Fiji tends to be the hub colony for the rest of the Pacific, developments in the country have a strong knock-on effect on the region, says Asian Development Bank economist Milovan Lucich.

Speaking to participants at the recent ADB Pacific Business Media Summit in Sydney, Australia, Lucich said they had seen signs of the economy picking up in the lead-up to the September election. 

“Fiji is the largest economy that we cover outside of Papua New Guinea and Timor Leste. The issue there is the elections coming up very soon. Developments in Fiji tend to have a very strong effect on the rest of the Pacific,” he said.
“We are seeing the economy picking up and government has been spending a lot in the lead-up to the elections. This has been driving growth but it could create further issues down the track.”
He said small economies tended to focus on tourism and driven by remittances in a lot of cases.
He said some of those economies had a fairly difficult recovery from the global economic crisis, and experienced shocks because of natural disasters.
“Typical features that face those economies such as Cook Islands, Samoa and Tonga tend to be in a high level of indebtedness, with the exception of Vanuatu.
“This means government has had difficulties creating fiscal space, space they can use for development spending, better infrastructure and services.”
He said the launch of the 2014 Asian Development Outlook (ADO) report soon would provide a comprehensive analysis of macroeconomic issues in developing Asia, with growth projections by country and region.
He said the ADO special theme chapter was on fiscal policy for inclusive growth, which would explore the benefits of such policy — public spending and revenue mobilisation — to promote inclusive growth.
Meanwhile, the two largest economies in the Pacific region have experienced strong commodity-led growth in recent years.
However, the soon-to-be-released 2014 Asian Development Outlook by the Asian Development Bank would focus on challenges faced by Timor Leste and Papua New Guinea in translating that growth into better services and living standards.
Asian Development Bank economist Milovan Lucich said PNG was due for a very large increase in growth going forward.
“This is due to the large energy projects coming online and that will have a very large effect on growth in other countries, although the effect on the broader economy may be slightly less now that the construction phase is over,” he said.
“Similarly Timor Leste has had strong growth related to oil and gas and government receives a large amount of revenue, which they are able to spend.
“They're able to increase their development spending quite strongly because these countries have had large amounts of revenue coming into them from the strong growth and strong commodity-prices they've had over the past decade.”
Despite this progress, he said, the increase in government spending had not necessarily translated into better living standards, services and infrastructure.



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