Economic growth in the Pacific is projected to rise to 5.4% in 2014 from 4.8% in 2013, according to the Asian Development Bank’s (ADB) latest Asian Development Outlook 2014, launched in Sydney on Tuesday.
Most economies across the Pacific are expected to perform better this year due to higher stimulus from the implementation of large infrastructure projects and improving global economic conditions.
“Near-term prospects for most Pacific economies are generally positive,” said Xianbin Yao, Director General of ADB’s Pacific Department.
“However, many countries in the region face challenges in translating short-term stimulus into longer-term productivity gains and inclusive growth.”
Higher growth in the region is led by the improving growth outlooks for two of the region’s larger resource exporting economies, Papua New Guinea (PNG) and Timor-Leste.
Growth in both countries relies on their energy and mineral exports, with PNG expected to benefit from initial liquid natural gas (LNG) exports by the end of the year. Growth in both economies also hinges on rising government expenditures, and the ability to manage budgets.
The near-term outlook for the Pacific is further bolstered by Fiji’s robust post-election economic prospects.
Higher consumption and investment, as well as steady tourism arrivals, are already apparent. Rebounds in tourist arrivals and higher public capital expenditures are seen to fuel higher growth in the Cook Islands and Palau.
Implementation of delayed infrastructure projects in Kiribati, the Marshall Islands, Tuvalu, and Vanuatu, as well as work to reconstruct and rehabilitate infrastructure damaged last year in Nauru, Samoa, and Tonga, is seen to drive growth in these economies.
Growth is expected to hold steady in the Federated States of Micronesia and the Solomon Islands, as public infrastructure spending in the FSM and log exports in the Solomon Islands remain weak.
Growth in the Pacific region in 2015 is expected to rise sharply to 13.3% with the first full year of PNG’s LNG exports.
Stronger growth is fueling price rises across the region, and inflation in the Pacific is projected to increase to 6.0% in 2014 (from 4.5% in 2013). Anticipated declines in international food and fuel prices are expected to result in more moderate inflation of 5.1% in 2015.
ADB’s flagship economic publication, ADO 2014 provides a comprehensive analysis of macroeconomic issues in developing Asia and the Pacific, with growth projections by country and region.