Articles: Modest Growth Expected for Pacific Economies in 2011, says ADB

Contributed by YokweOnline on Aug 02, 2010 - 11:20 AM

Modest Growth Expected for Pacific Economies in 2011, says ADB

The Pacific is particularly vulnerable to rising oil prices, as the region pays more for fuel than other regions, according to the Asian Development Bank’s (ADB) Pacific Economic Monitor. The July 2010 edition of the report, a tri-annual economic review of 14 Pacific island countries by ADB, warns that inflation is now projected to reach 5.9% in the Pacific region overall this year due to the post-crisis rise in world oil prices.

  • ADB REPORT: Pacific Economic Monitor, July 2010 [1]

“Fuel and utility prices are too high in most Pacific countries. This is a problem that can be tackled by policies that enhance competitive pressures and raise efficiency,” said Robert Wihtol, Director General of ADB’s Pacific Department.

Pacific island economies, excluding PNG and Timor Leste, are expected to perform slightly better overall in 2011 than in 2010. Projected economic growth for 2010 remains unchanged at 0.5%; however, this performance is expected to improve in 2011, albeit only slightly, with a 1.3% expansion projected.

An upgrade of economic growth in Solomon Islands in 2010, from an earlier expectation of 2.0% to 3.5%, is largely due to stronger than expected recovery in the commodities of logging, cocoa, fish and palm oil.

In contrast to Solomon Islands, The Monitor mentions downgrades in growth for the Cook Islands, Kiribati, Nauru, Tonga, and Vanuatu economies, due to weaker than expected tourism growth outside Fiji, and slower than expected implementation of public investment programs.

The relative cost of telecommunications, fuel and electricity is explored in the latest issue. The report notes the good progress made in lifting the performance in telecommunications, notably in Palau and Tonga, and the potential to extend the gains to other countries and other industries.


GDP growth projections for 2010 remain unchanged at 0.5%. The ongoing weakness in domestic demand is evident in low import demand. The government is continuing a broad-based public sector reform program. Efforts are guided by the recommendations of the Comprehensive Adjustment Program Advisory Group, which identified expenditure rationalizations that could achieve annual savings of $4.0 to $10.5 million within 3 years, and the Tax and Revenue Reform and Modernization Commission, which recommended replacing an array of existing taxes with a modern tax regime that offers higher revenue potential.

Actions under the Marshall Energy Company Comprehensive Recovery Program are also leading the reinvigoration of the state- owned enterprise. The reforms are critical to addressing impediments to private sector-led economic growth arising from weaknesses in the revenue and public expenditure systems.

The Marshalls Energy Company provides a guide to the sort of structural reforms that can lift utility efficiency. Guided by the Marshalls Energy Company Comprehensive Recovery Plan, corporate governance has been improved through reconstitution of the board, procurement and financial management practices are being improved, tariffs have been realigned to reflect costs, system loss is being reduced, billings are being improved through the adoption of prepaid metering and better collection practices, and the utility’s generators and other major equipment are being overhauled.


The report provides an update of recent developments in the region and explores topical policy issues. The ADB publication uses data from Australia, New Zealand, US, and Asia to supplement data from the region and to provide up-to-date assessments and broader coverage of the Pacific island economies.

ADB, based in Manila, is dedicated to reducing poverty in the Asia and Pacific region through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2009, it approved a total of $16.1 billion in financing operations through loans, grants, guarantees, a trade finance facilitation program, equity investments, and technical assistance projects. ADB also mobilized cofinancing amounting to $3.2 billion.

- Asian Development Bank, August 2, 2010

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