Pacific Island Economies: Beautiful Islands, Challenging Development

The Pacific Island Countries (PICs) face challenges in achieving sustainable economic growth. Despite natural resources and growth in Asia, their remoteness, small populations, and vulnerability to disasters hinder progress. Economies rely on a few exports like fish and tourism, making them susceptible to price fluctuations and external shocks. While some PICs like Fiji and Palau benefit from tourism, others struggle with limited economies of scale. Collaboration and investment in areas like agriculture and infrastructure are crucial for overcoming these obstacles. As per the world bank database 2023 the economic overview of Pacific Island States can be summarized as;

Papua New Guinea (PNG) has close to 10 million inhabitants. The country gained its independence in 1975 and grew its economy to $26.6 billion by 2021. With $2,600 gross domestic product (GDP) per capita, PNG is a lower-middle-income country whose primary sectors include agriculture and fisheries. Important export industries are mining (such as petroleum gas, gold, and copper ore). Thus, PNG has $11 billion in exports, against a much lower $4.3 billion in imports. Net official development assistance (ODA) equals 4.6% of gross national income, the lowest among Pacific economies. Personal remittances amount to $11 million.

Fiji (FIJ) became independent in 1970. It has a current population of 925,000, not much higher than in 2010. Its $4.3 billion economy is mainly tourism-based with over $1 billion of its $2 billion in exports dependent on personal and business travel. Imports to Fiji have grown significantly higher, to 60% of GDP ($2.8 billion). Net ODA rose recently to almost 15%, while historically between 2% and 3%. Overseas worker remittances is nearly $400 million.

Solomon Islands (SOL) has a $1.6 billion economy, created and maintained by the Pacific’s fast-growing population of 707,000 people. The grew by 28% from 440,000 in 2011. Some 75% of its labor force works in subsistence agriculture and fishing. Exports of goods, primarily rough wood to the People’s Republic of China (PRC), are worth $479 million. Imports include petroleum, machinery, and food; valued similar to exports. Net ODA have dropped from 30%-40% of GDP to 16%. Personal remittances are slightly more than $50 million

Vanuatu (VAN) has a population of 319,000 people and a $956 million economy, primarily agriculture, which employs 80% of the labor force. Its $270 million in exports are mainly frozen fish and ships. Service exports amount to $324 million. ODA has been steady at 15% of gross national income (GNI). Remittances have consistently grown to $207 million.

Samoa (SAM) has 218,000 inhabitants with a GDP of $844 million. The county’s economy is dependent on agricultural exports, development assistance, and remittances. About 66% of the population works in agriculture, producing coconut and copra. Exports of goods are one-fifth of service exports ($259 million), primarily tourism. Net ODA is 10% of GDP, one of the lowest in the region. Its $248 million in personal remittances offer a significant amount of economic support.

Kiribati (KIR) became independent in 1979 and now has a population of about 129,000 people. The size of its economy is $207 million annually. As measured by GDP per capita, it is the poorest country in the Pacific. Most income comes from abroad and includes fishing licenses, ODA, worker remittances, and tourism. Exports of goods, mainly fish, amount to $94.5 million and services worth $12 million. Net ODA meets the region’s average of 20%. Personal remittances account for 6% of GNI.

Tonga (TON), independent since 1970, has a population of approximately 105,000 and a GDP of $470 million. Tonga’s economy heavily relies on agricultural exports (bananas and coconuts), development projects, and remittances (46%). However, the value of goods exports is significantly lower than the substantial amount of service exports, which primarily stem from tourism.

The Federated States of Micronesia (FSM) is home to approximately 115,000 people with a GDP of $430 million. A significant portion of GDP, around 67%, comes from services. Imports remain relatively high, over 70% of GDP, while exports generate 30%.

The Marshall Islands (RMI) has a population of approximately 42,000 people with a GDP of $280 million. Services provide 65% of value added. The relies on imports, which comprise over 69% of GDP. This indicates a relatively high level of dependence on external sources for meeting domestic consumption demands. In contrast, exports plays a much smaller role, generating around 12% of the country’s GDP. Like many small island nations, it grapples with the challenge of balancing trade imbalances and reducing import dependence to foster sustainable economic growth. Diversifying the economy and promoting export-oriented sectors is crucial for enhancing economic resilience and reducing its vulnerability to external economic shocks.

Palau (PAL) has a population of approximately 18,000 and GDP of $217 million. Services, primarily tourism, plays a significant role in the economy, contributing around 73% of GDP. The pandemic shut down tourism while the economy suffered tremendously. Its recovery is not going as fast as expected. The country aims to diversify its economy, boost exports, and reduce import dependence to build sustainable growth.

Nauru (NAU) is a one-island nation with a population of approximately 13,000 people and a GDP of $150 million. Its service sector, with financial services, plays a significant role in the economy. Nauru is a highly open economy and faces the challenge of high imports, which are over 115% of GDP, with services exports account for approximately 55%.

Tuvalu (TUV) is a small island developing state comprising nine atolls in the South Pacific. It is geographically isolated and highly vulnerable to climatic and economic shocks. The country’s national income derives from fishing license fees, trust fund investments, ODA, its “dotTV” domain name royalties, and remittances. Disasters triggered by natural hazards increase the country’s economic volatility and substantially affects its fiscal position

Source: World Bank database https://data.worldbank.org & Asian Development Bank Publications & Documents https://www.adb.org/publications/