Pacific economies will grow by an average 3.8 per cent this year; down from 7 per cent last year, mainly because of pressures faced by Papua New Guinea (PNG) and Fiji — the region’s largest economies.
The Asian Development Bank (ADB) notes Pacific economies face lower growth and tighter fiscal conditions this year because of low commodity prices and severe cyclones.
ADB’s flagship annual economic publication, Asian Development Outlook 2016, was recently launched by the bank.
ADB says Fiji faces economic difficulties in the aftermath of last February’s Severe Tropical Cyclone Winston and an early assessment indicated that total damage and losses from the cyclone — the worst on record in the southern hemisphere — would likely exceed $US500million ($F1.04billion), which is roughly equivalent to 11 per cent of Fiji’s gross domestic product (GDP).
This, the bank said, was expected to have a major impact on growth in 2016, particularly in sugar production.
“Yet again, a weather event of historically unprecedented severity has hit a South Pacific island nation,” said Xianbin Yao, director general of ADB’s Pacific Department
“The effects on the country’s economic performance are significant and likely to be lasting.”
Mr Yao said once again this underscored the importance of international assistance to Pacific countries to enhance their resilience to disasters.
“ADB, together with other development partners, are stepping up our support to countries in the region to develop climate-proofed infrastructure, build fiscal buffers and expand access to disaster risk financing.”
The Reserve Bank of Fiji yesterday said growth for this year was expected to be driven by significant post-cyclone reconstruction work and strong retail and tourism activity.
The central bank highlighted in its March economic review that consumption and investment spending were anticipated to remain buoyant, supported by higher aid inflows and personal remittances, cyclone-related assistance including withdrawals from the Fiji National Provident Fund and various credit facilities provided by financial institutions.
Meanwhile, the ADB said Papua New Guinea faces serious fiscal challenges, as weak commodity prices have resulted in shortfalls in mineral sector revenues.
Consequently, the bank revealed that GDP growth was forecast to ease to 4.3 per cent in 2016 — less than half of last year’s rate — and to slow further to 2.4 per cent in 2017.
Elsewhere in the region, Timor-Leste’s growth is forecast at 4.5 per cent in 2016 and 5.5 per cent in 2017 (up from 4.1 per cent in 2015) on rising public and private investment.
“Encouraging private investment remains critical to diversifying the economy and maintaining growth in the face of declining petroleum production and rising pressures on the country’s Petroleum Fund resources,” the ADB noted.