Pacific returns to positive growth as vaccinations and reopening of borders bolster economies in 2022 (AfDB)
Fiji, the second largest economy in the sub-region, is expected to grow by 7.1% in 2022 and 8.5% in 2023. The opening of the country’s borders in December 2021 gives hope for a revival of tourism.
After 2 years of recession caused by the coronavirus disease (COVID-19) pandemic, the Pacific is expected to return to positive growth this year, according to Asian Development Outlook (ADO) 2022, the AfDB’s flagship economic publication, released today. today.
The economies of AfDB member developing countries in the Pacific contracted by an average of 0.6% in 2021 as the COVID-19 pandemic continued to weigh on tourism and trade. Growth in the Pacific is expected to resume to an average of 3.9% in 2022 and 5.4% in 2023. Although most Pacific economies are expected to return to growth in 2022, led by economies in the sub- region dependent on tourism as borders reopen, economic contraction is seen persisting in the Solomon Islands with community transmission of COVID-19 in the first half of the year, as well as in Tonga due to the impacts of an eruption underwater volcanic and tsunami in January.
“Increasing vaccination rates will help most Pacific economies recover from the effects of the pandemic by allowing borders to open safely and enabling a return to positive economic growth,” the chief executive said. from AfDB for the Pacific, Leah Gutierrez. “This suggests that the Pacific has turned a corner, and that is good news. Now is not the time to be complacent about vaccine deployment. It is essential that all countries in the sub-region achieve coverage At the same time, efforts to reduce increased COVID-19 response spending, attention to reducing debt levels and careful monitoring of inflationary pressures are needed to support a sustainable and inclusive economic recovery. .
High global fuel prices due to the Russian invasion of Ukraine are adding to inflationary pressures in the Pacific due to high transportation costs and rising import prices. On average, inflation in the Pacific is expected to rise sharply to 5.9% in 2022, before declining to 4.7% in 2023. High inflation poses a risk to the recovery by potentially limiting economic growth by reducing the purchasing power and consumer spending.
In 2021, growth in Papua New Guinea (PNG), the Pacific’s largest economy, was held back by two outbreaks of COVID-19, supported by a very low vaccination rate. Some relief has come from high commodity prices and fiscal stimulus supported by the AfDB and other development partners. The increase in mining activities in the second half of the year is expected to contribute to growth of 3.4% in 2022. The ADO 2022 indicates that growth in PNG is expected to reach 4.6% in 2023.
Fiji, the second largest economy in the sub-region, is expected to grow by 7.1% in 2022 and 8.5% in 2023. The opening of the country’s borders in December 2021 gives hope for a revival of tourism, which remains the key to a rapid economic recovery and restored employment. However, international competition among travel destinations is expected to be intense, according to the AfDB report.
After successfully keeping COVID-19 at bay for nearly 2 years, community transmission of the virus erupted in the Solomon Islands in January this year. The ADO 2022 expects Solomon Islands’ economy to contract by 3% in 2022 due to restrictions on mobility and domestic transport, and the associated health effects of the pandemic. While logging activities are expected to decline in 2023, the expected easing of COVID-19 restrictions will increase construction, fishing and mining, leading to a 3% economic recovery.
Vanuatu’s economic growth is forecast at 1% in 2022, with growth in public services as well as a recovery in agriculture and construction offset by domestic transmission of COVID-19, which has delayed the reopening of international borders . Growth is expected to reach 4% in 2023 with the recovery of tourism activity.
The South Pacific economies of Cook Islands, Niue, Samoa and Tonga were, until recently, largely spared the health effects of community transmission of COVID-19, allowing time for near-universal vaccination coverage. . The report projects that growth in the Cook Islands will be 9.1% in 2022 and 11.2% in 2023, supported by a vaccination rate of over 96% of the eligible population and the acceleration of infrastructure projects to improve preparation for welcoming tourists. Economic recovery in Niue will also depend on the safe easing of restrictions and reopening to tourists in the coming months.
With no clear sign of reopening borders in Samoa, growth in 2022 is expected to be tepid at 0.4%. Constrained by the healing of the tourism sector, only a slight increase in growth to 2.2% is projected for 2023. The greatest risk to the economic outlook would be any escalation in community transmission of COVID-19 and a consequent delay in the restoration of tourism. The late reopening of borders in Tonga due to the recent volcanic eruption and community transmission of COVID-19 is expected to slow the long-term tourism recovery. ADO 2022 projects an economic contraction of 1.2% for 2022 and a return to positive growth of 2.9% in 2023 assuming the reopening of borders.
North Pacific economies contracted in 2021 as travel and mobility restrictions continued to stifle tourism in Palau and trade in the Federated States of Micronesia (FSM) and the Marshall Islands. In the FSM and the Marshall Islands, the reopening of borders should stimulate recovery, but this depends on further progress in vaccination. An economic expansion of 2.2% is expected in the FSM in 2022, accelerating to 4.2% in 2023, while the economy of the Marshall Islands is expected to return to growth of 1.2% in 2022, reaching 2.2% in 2023. The Palau-led economy is expected to reach 9.4% in 2022 before accelerating to 18.3% in 2023, provided the effects of the pandemic dissipate, allowing a gradual return to pre-pandemic levels of international arrivals.
The report projects renewed growth in the Central Pacific economies of Kiribati and Tuvalu and slower growth in Nauru in 2022. Soaring global oil prices will significantly affect inflation in these import-dependent economies. Growth of 1.8% is expected in Kiribati in 2022, reaching 2.3% in 2023. Nauru’s economic growth will slow to 1% in 2022 and increase to 2.4% in 2023. Tuvalu will grow by 3 % in 2022 and again in 2023.
The AfDB is committed to achieving a prosperous, inclusive, resilient and sustainable Asia and the Pacific, while continuing its efforts to eradicate extreme poverty. Founded in 1966, it is owned by 68 members, including 49 from the region.
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