Pacific Island Highlights from World Bank’s East Asia and Pacific Economic Update 2011

The World Bank recently published its second half-yearly economic update for the East Asia and Pacific Economic Update 2011  .  Agricultural and forestry-relevant highlights from the Pacific region are below.

Fiji

  • “Current projections are for Fiji’s economy to grow by 2.0 to 2.5 percent in 2011 compared to 0.3 percent in 2010. The relatively ambitious growth target hinges on the continued strength of the tourism sector, as well as stronger performance of the manufacturing and forestry industries.”

  • “The sugar industry may experience limited improvements in 2011, both in terms of production and mill efficiency. Production of sugar cane is expected to rise as a result of the recovery from the 2010 cyclone, while mill efficiency may rise with attention being given to maintenance and upgrading as reflected in the FJD20 million set aside for this purpose in the budget.”

  • “On the external front, export earnings recovered in 2010. Decline in sugar receipts were offset by rises in gold, timber, and fishing receipts…Net income and transfers both worsened in 2010, due to a rise in profit repatriation, fall in remittances and no EU sugar transfers being received due to reforms in EU’s preferential pricing scheme. Overall, the current account deficit widened from 7.6 percent of GDP in 2009, to 11.2 percent of GDP in 2010.”

  • “National poverty headcount ratio declined from 39.8 percent in 2002/03 to 35.2 percent in 2008/09. While there has been considerable improvement in urban areas over the six years (a decline from 35 percent to 26 percent), rural areas showed no decline in poverty, with a poverty headcount remaining at 44 percent. The trend was consistent with the sectoral pattern of economic growth: most of the decline in poverty was driven by the growth of non-agricultural sectors in urban areas.”

  • “The dominant item in the 2011 capital budget is a 110 million Fiji dollar (FJD) allocation equivalent to around 20 percent of capital expenditure for the restructuring of the Fiji Sugar Corporation (FSC), recently taken over by the government.”

Papua New Guinea

  • “Three factors underlie the strength of PNG’s economy: foreign-investment funded construction projects; record prices for PNG’s exports, and strong government spending financed by higher-than-expected revenues…Up to Q3 2011, prices of PNG’s cash crop exports (particularly coffee, copra and palm oil) returned to or exceeded the highs of mid-2008.”

  • “The sectors of the economy most directly impacted by these factors—particularly construction, road, air and sea transport, storage and communications— are expected to expand by as much as 20 percent in 2011. This strength is spilling into other sectors in the economy (e.g., retail trade), thus creating a broader dynamic. Even agriculture and fishery production are expected to grow by over 4 percent in 2011 as producers respond to higher cash crop prices.”

  • “Core inflation measures have also continued to rise, reaching between 7 and 8 percent for the year to the second quarter and remained near that level through the third quarter…The resurgence in global food prices early in the year directly explains about one-third of this acceleration in prices. In contrast, food prices contributed to 60 percent of PNG’s overall inflation between March 2008 and June 2009.”

Vanuatu

  • Growth moderated towards the end of 2010, as visitor arrivals and infrastructure spending declined, and copra prices fell. Throughout 2011, Vanuatu has benefited from resurgent copra prices, but continues to face risks from a slower-than-expected recovery in tourism arrivals, reductions in government recurrent expenditure, lower donor-financed infrastructure spending.”
  • “With sound macroeconomic fundamentals, Vanuatu remains relatively well-placed to deal with future shocks. Inflation is expected to remain moderate, reaching 4 percent in 2011, driven by increased food prices, and expansions of private sector credit to both businesses and households in the context of accommodative monetary conditions.”

Samoa

  • “Samoa was hit hard by the combined impacts of a food and fuel crisis, the global economic crisis and a major tsunami in 2009…Inflationary pressures are projected to decline, given an expected easing of oil prices and expansion in agricultural production for domestic consumption.”

Tonga

  • “The economy contracted by 0.5 percent in FY2010 (ended June 2010) and is estimated to have achieved only modest growth of 1.3 percent in FY2011 as remittances and tourism earnings fell, weather events  disrupted alreadydeclining agricultural exports, and private sector credit contracted as banks tightened lending conditions in response to a sharp increase in non-performing loans.”

Kiribati

  • “Kiribati has been running consecutive budget deficits, averaging 12 percent of GDP for the past decade. These deficits have been financed through RERF draw-downs and concessional loans. The 2011 budget projected a deficit of 14 percent of GDP, up from 12.5 percent in 2010. Emerging revenue shortfalls, arising from lower than- expected income from fishing license fees, and additional expenditure on pensions and copra subsidies in the context of upcoming elections may see the deficit further increase.”

Solomon Islands

  • “In the second half of 2011, Solomon Islands enjoyed a markedly more secure macroeconomic footing relative to most of the preceding decade. A surge in logging, support from the government’s development partners, and gains in macroeconomic management lifted growth rates, and built foreign exchange and government cash reserves. Nevertheless, recent growth has been concentrated in natural resource exploitation, raising concerns about its sustainability.”

  • “The Solomon Islands economy is likely to grow by around 9 percent in 2011 based on data through to August, several percentage points  stronger than earlier expected. This strength follows an estimated 7 percent expansion in 2010, following a 4¾ percent contraction induced by the global economic downturn in 2009. Logging activity is expected to contribute 2¼ percentage points of this year’s growth—the Solomon Islands Government now expects log exports of 1.75 million m3 in 2011, compared with 1.43 million m3 in 2010. The start of production at the Goldridge gold mine is estimated to contribute another 2 percentage points. Fishing, cocoa and copra production have also all performed strongly this year, buoyed by good production conditions and high international prices. But it is greater government spending (including through donor-funded projects) that explains most of the expansion in the Solomon Islands’ non-forestry, non-mining economy in 2011.”

  • “The government’s revenues have exceed expectations in 2011, attributed to improvements in tax administration and the unexpected strength of logging activities and prices, while Solomon Islands Governmnet-funded development spending in particular was below budget.”

  • “The rise in many global grains prices around the turn of 2011 has had little impact on the Solomon Islands, even among urban consumers who are the most dependent on imported food items. Rice is the principle imported staple, and movements in its retail price have been kept in check by the entry of new wholesalers sourcing rice from a wider range of producers, followed by renewed consolidation in the market.”

Tuvalu

  • “Reduced seafarer remittances and higher food and fuel prices drove the economy to contract during 2009 and 2010, with the impact moderated by increases in donor expenditure. Improved remittance income is likely to spur growth of around 1 percent in 2011.”

 

 

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