World Bank: 11 Pacific Island countries expected to see slower growth in ‘24, ’25

Eleven Pacific Island countries are expected to see slower growth in 2024 and 2025, as the boost from the COVID-19 pandemic recovery fades and fiscal policies gradually lighten, according to the World Bank’s Pacific Economic Update.

The March 2024 World Bank’s Pacific Economic Update also finds that growth decelerated to 5.5% in 2023 after a historically high growth rate of 9.1% in 2022—the first year of the recovery.

The Economic Update outlines the economic status of Pacific Island countries after the initial pandemic shock.

The Pacific Island countries are the Federated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Palau, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu

The Economic Update findings were discussed by World Bank economists and authors during a media briefing at the World Bank office in Pohnpei yesterday. The Update provides a twice-yearly assessment of the 11 Pacific Island economies.

The report also finds that the reduction in growth is due to the group’s largest economy—Fiji—moving toward its long-term growth rate after a strong rebound from the pandemic in 2022. This moderation reflects slowing economic activity in Fiji, which accounts for more than half of the region’s output.

When Fiji is excluded, the remaining Pacific Island countries experienced accelerated growth in 2023, after three years of contracted output.

Average inflation declined from a peak of 7.5% in 2022 to 6.5% in 2023, reflecting significant labor and supply shortages in tourism and remittances-led countries like Palau, Samoa, Tonga, and Vanuatu.

Shifts in global economic growth, trade, and international tourism pose significant challenges to economic prospects and poverty reduction, risks that could heighten due to geopolitical tensions.

Despite the ongoing economic recovery, Pacific Island countries still face formidable challenges.

Medium-term growth prospects have worsened, with output significantly below the pre-pandemic trend.

More than half of Pacific countries in the report are projected to see slower per capita growth than advanced economies, leading to widening income gaps and deteriorating prospects for poverty reduction, according to the Update report.

Ekaterine Vashakmadze, who is the World Bank senior economist in the Pacific, said that despite a commendable rebound in growth after lifting pandemic restrictions, Pacific Island countries will face challenges in bringing full recovery output growth to its pre-pandemic path.

Vashakmadze said fundamental reforms to invigorate investment growth can help improve medium-term growth prospects.

World Bank senior economist Reshika Singh said risks remain as adverse shifts in the global economy, trade, and tourism may pose challenges to the economic prospects and poverty outcomes. Singh said those could stem from an uncertain global environment, most notably heightened geopolitical tensions.

Lars M. Sondergaard, who is the World Bank’s economist for Human Development in the Pacific, said if Pacific children struggle with reading proficiency by the end of primary school, they will face daunting hurdles to succeed in their further education.

While the situation is improving, progress is slow, Sondergaard said.

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