Pacific to Return to Positive Growth in 2021 — ADB
MEDIA RELEASE issued by the Asian
Development Bank (ADB)
Wednesday, 28 April, 2021
See attached Nauru chapter.
Pacific to Return to Positive
Growth in 2021 - ADB
MANILA, PHILIPPINES (28 April
2021) - The Pacific is forecast to return to positive growth
in 2021, according to a new report by the Asian Development Bank
(ADB) released today.
But the region's outlook remains
subject to significant risks, and there is considerable variability
across the 14 Pacific developing member countries (DMCs). The DMC
economies were estimated to have contracted by 5.8% in 2020 as the
coronavirus disease (COVID-19) pandemic directly impacted tourism
and trade flows and affected construction activity, according to
the
Asian Development Outlook (ADO) 2021, ADB's flagship economic
publication. Recovery of 1.4% is forecast for 2021, contingent on
improvements in tourism numbers, commencement of delayed
construction projects, and resumption of labor mobility and
cross-border trade.
"The start of the COVID-19 vaccine
rollouts, both within Pacific DMCs and among their trade and
tourism partner countries, indicate some economic recovery is
likely in 2021," said ADB Director General for the Pacific Leah
Gutierrez. "However, risks to the recovery remain, particularly in
tourism-oriented economies that are feeling the heaviest impacts of
the pandemic crisis."
Overall growth in the Pacific
subregion this year is likely to be held back by contractions in
smaller tourism-dependent economies, including the Cook Islands,
where gross domestic product is expected to fall by more than a
quarter; Palau, one of the most tourism-dependent economies in the
world; Samoa; and, to a lesser extent, Tonga. Travel bubbles are
projected to contribute to a gradual recovery in these economies,
initially in the Cook Islands and Niue with New Zealand, and Palau
with Taipei,China. Overall, growth for the Pacific is expected to
improve to 3.8% in 2022.
The ADO projects the Cook
Islands economy to contract by 26% in 2021 before recovering to
growth of 6% in 2022 with the opening of a proposed travel bubble
with New Zealand. Samoa's economy is likewise forecast to contract
by 9.2% in 2021 before recovering to 3.1% growth in 2022 once full
vaccine coverage is achieved and international travelers are able
to return. In Tonga, the impact of the twin shocks of Tropical
Cyclone Harold and the COVID-19 pandemic in early 2020 will
continue to constrain the construction and tourism sectors,
contributing to a 5.3% contraction in 2021.
The ADO projects the Tongan economy to return to positive
growth, by 1.8%, in 2022.
Papua New Guinea (PNG), the biggest
economy in the Pacific, is expected to grow moderately at 2.5% in
2021 as it recovers from a pandemic-induced recession in 2020.
However, a recent surge in COVID-19 cases threatens prospects for
economic recovery. Development partners are assisting with
budgetary support and the delivery of COVID-19 vaccinations.
Economic growth in PNG is projected to accelerate to 3% in
2022.
Fiji, the subregion's
second-largest economy and one heavily dependent on tourism, is
similarly forecast to expand in 2021, by 2.0%, following an
unprecedented 19.0% contraction last year. Fiji's economy is
projected to grow further by 7.3% in 2022, assuming a recovery in
tourism from effective vaccination programs both domestically and
in its major tourist markets. Revived tourism would mitigate some
of the impact of COVID-19, but it may take several years for the
economy to return to pre-pandemic levels.
The ADO expects the
Solomon Islands economy to recover, growing by 1.0% in 2021 and
4.5% in 2022, as fishing and construction rebound. The construction
and related sectors are expecting a boost from work on public
infrastructure projects, including the Tina River Hydropower
Project, upgrades to transport, the rehabilitation and expansion of
water supply and sanitation systems, and construction for the 2023
Pacific Games. Logging output is expected to continue to decline,
reflecting government efforts to improve sustainability.
Vanuatu's economy contracted in
2020 from the effects of the trade and travel restrictions caused
by COVID-19 and Cyclone Harold. With growth of 2.0% in 2021 and
4.0% in 2022, a cautious recovery is expected as these restrictions
are gradually lifted. However, this will depend on a successful
vaccination rollout and establishment of travel bubbles with
Vanuatu's main tourism markets.
Economic decline in the North
Pacific-Federated States of Micronesia (FSM), the Marshall Islands,
and Palau-is forecast to continue in 2021, with negative growth of
1.8% for FSM, 1.4% for the Marshall Islands, and 7.8% for Palau.
But these contractions are expected to be more muted compared to
2020, as the ongoing COVID-19 vaccine rollout eases
pandemic-related border restrictions that stalled international
tourism and impeded trade. The ADB report projects a return to
growth for all three North Pacific economies in 2022 (2.0% for the
FSM, 2.5% for the Marshall Islands, and 10.4% for Palau) as
restrictions are eased further and more business activity
resumes.
Although free of COVID-19
infections so far, the Central Pacific economies of Kiribati,
Nauru, and Tuvalu saw economic expansion slow in 2020 as trade and
travel restrictions delayed infrastructure projects. In 2021,
growth is expected to improve by 1.5% in Nauru and by 2.5% in
Tuvalu as these projects resume. Kiribati will see a small
contraction of 0.2% due to continued restrictions on the movement
of goods and people while the country awaits the arrival of
COVID-19 vaccines. In 2022, the ADO expects construction
activity to help Kiribati return to economic expansion, of 2.3%,
while Tuvalu will see growth rise to 2.0%. Growth in Nauru is
forecast to moderate at 1.0% in 2022 with the impending closure of
the Regional Processing Centre in 2021.
ADB is committed to achieving a
prosperous, inclusive, resilient, and sustainable Asia and the
Pacific, while sustaining its efforts to eradicate extreme poverty.
Established in 1966, it is owned by 68 members-49 from the
region.
Pacific region highlights from
the Asian Development Outlook 2021
The Pacific is expected to recover
after a crippling downturn in 2020. After the subregion's economy
contracted by 5.8% due to the impact of COVID-19, moderate growth
of 1.4% is forecast for 2021 and 3.8% for 2022. This mirrors the
outlook for Papua New Guinea, the subregion's largest economy,
where output will grow moderately this year, then climb further
next year as the recovery strengthens. Fiji will follow a similar
trend, but on a stronger rebound from a deeper fall (an
unprecedented 19% contraction in 2020). Travel bubbles are expected
to contribute to a gradual recovery in some smaller Pacific
economies-initially, the Cook Islands and Niue because of their
economic ties with New Zealand, and Palau because of its economic
ties with Taipei,China. Widespread vaccination, both within Pacific
economies and in their trade and tourism partners, is expected to
play a major role in boosting growth in 2022. Inflation in the
Pacific is forecast at 3.7% in 2021, well above the average for
developing Asia. This is due mainly to Papua New Guinea, where the
depreciation of the local currency and quantitative easing are
stoking inflation pressures. Inflation is expected to remain low in
most Pacific economies this year. But deflation is forecast for
Samoa due to lower import prices, utility subsidies, and increased
agricultural production. Inflation in the subregion is expected to
rise only slightly to 3.9% in 2022.
Read the 2021 Asian Development
Outlook report in full
https://www.adb.org/publications/asian-development-outlook-2021
View Pacific news release
online:
https://www.adb.org/news/pacific-return-positive-growth-2021-adb
For media enquiries/interviews
please contact:
Sally Shute-Trembath
Senior External Relations Officer
ADB Sydney office
sshute-trembath@adb.org
Tel +61 2 8270-9444