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World Bank Forecasts Pacific Economic Slowdown
Caleb Fotheringham, RNZ Pacific Journalist
Economic growth in the Pacific is forecasted to drop to 3.6 percent this year, from 5.8 percent in 2023, raising concerns the rate of growth will not return to its pre-pandemic level.
According to the World Bank's Pacific Economic Update, growth in the Pacific is slowing following the Covid-19 recovery boost driven by borders re-opening.
The report said medium-term growth prospects in the region have dropped from an annual average of 3.2 percent from 2000 to 2019 to 2.7 percent in 2020 to 2029.
"This slowdown will make it harder for people in the region to improve their quality of life, with poverty likely to remain high compared to countries with similar incomes," it said.
"Investment growth is projected at just one percent annually in 2020-29, well below the 4.2 percent average from 2010-19."
World Bank economist Eka Vashakmadze said most of the declining growth was expected from the deceleration of the "extraordinary" rebound following Covid-19 pandemic.
"But there are some indications that going forward growth may be lower than it was before the pandemic. That we will observe trend decline in regional growth."
Read more:
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Vashakmadze said global investment was declining, and the Pacific is not unique that it is experiencing less.
She said investment was already slowing even prior to the pandemic.
"One reason why investment is so weak in the region is because it suffers these very frequent shocks."
Vashakmadze said the Pacific needed to build resilience to rebound quickly from the shocks, as as cyclones.
She added there is room to grow both tourism and agriculture sectors in the Pacific.
"Clearly tourism is very huge and very big, but in terms of its quality, we still think it has not reached its full potential.
"There's still room for innovation, for improvement, for change, especially when you talk about the revenue from tourists. Same in agriculture focusing on higher crops rather than subsidising the traditional crops."
However, she said countries should primarily focus on creating economies that foster growth and not on what sector is best.
"We don't want to pick the winners," she said.
"Usually it changes so you need to create environments conducive [for growth] and then if you have the right signals then investors go to whatever is profitable."
Inflation
According to the World Bank, inflation across the region has eased from 6.8 percent in 2023 to 4 percent in 2024.
"This does not mean that the previous inflation went unnoticed or is not impacting right the cost of living, it continues to be there because once it's built there."
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