Written by Kirsty Needham
SYDNEY (Reuters) – Growth across the Pacific Islands will fall from 5.8% in 2023 to 3.6% this year as the post-pandemic recovery fades and Fiji, which accounts for half of the region's output, slows significantly, the World Bank says. It said on Tuesday that it was expected to slow.
The report says weak investment, rising climate risks and structural challenges are contributing to the long-term economic slowdown. Without immediate action to increase investment, Pacific island countries may struggle to reduce poverty and create new economic opportunities, it added.
The Washington-based global lender said investment across Pacific island countries has declined on average in seven of the past 15 years.
In a “worrying outlook”, investment growth in the 11 Pacific Island countries is expected to be around 1% per year over the next 10 years, significantly lower than the average growth rate of 4.2% between 2000 and 2019. The report said.
According to the report, losses from natural disasters average 1.5% of annual gross domestic product, and many Pacific island countries struggle to cope with the economic fallout after disasters such as cyclones, with “construction, destruction, They say they are stuck in a cycle of “repair.”
Fiji's growth is expected to slow to 3% in 2024, while some small Pacific island countries that rely on tourism will see growth as tourists from Australia and New Zealand return.
Fiji's public debt will reach 79% of GDP in 2024, the highest in the region and a third higher than pre-pandemic levels.
In Vanuatu, the liquidation of national airline Air Vanuatu hit tourism and caused a severe economic shock, with growth slowing to 0.9%.
According to the World Bank, Vanuatu has experienced a decade of investment contraction.
The region also needs investment in ports, interisland transport and digital connectivity, as well as investments in sustainable tourism and agriculture.
The report says that despite having some of the world's largest ocean areas, the Pacific Islands are underutilizing sustainable fishing, aquaculture and marine biotechnology.
Dana Volicek, senior economist at the World Bank, said the cost of internet connectivity is relatively high and speeds are slow compared to other parts of the world.
“Digital connectivity really needs to be addressed,” she said at a media briefing in Suva.
Reforming payment systems and expanding digital payment services are needed to make offshore workers' remittances more effective for their families, officials said.
(Reporting by Kirsty Needham in Sydney; Editing by Lincoln Feast.)