The World Bank anticipates that economic growth in the Pacific region will decline to 2.6% this year, a sharp drop from the 5.5% recorded in 2023. This decline is primarily attributed to adverse global economic conditions, natural disasters, and climate change impacts that have plagued the area.
In a recent economic update, the World Bank highlighted that while inflation is gradually decreasing, it still remains above pre-pandemic levels, contributing to a persistently high cost of living. Projections show that inflation is expected to fall to 3.6% by 2025, down significantly from a peak of 7.4% in 2023. However, elevated prices continue to overburden household budgets.
The report also discusses the region’s dependence on external monetary support, remittances, and imported goods, which may expose local economies to various economic shocks. For tourism and remittance-driven countries such as Samoa, Tonga, Palau, and Vanuatu, aggregate growth is expected to halve between 2024 and 2025.
In the Solomon Islands, which has the second-largest economy among the eleven Pacific Island nations covered in this update, growth remains around 2.5%. This stagnation is due to structural hurdles like diminishing logging revenues and a lack of economic diversification.
The report identifies enhancing women’s participation in the labor force as a critical strategy to build long-term economic resilience in the region. Currently, only an average of 42.7% of working-age women are engaged in the labor market, which is significantly lower than male participation rates. Increasing this participation could potentially boost GDP per capita across the region by over 20%.
Senior World Bank economist Ekaterine Vashakmadze emphasized that while Pacific nations cannot control external shocks, they can strengthen domestic economic foundations. Implementing structural reforms, particularly those aimed at increasing women’s workforce engagement, stands out as one of the highest-impact strategies for economic enhancement in the region.
This report underscores the urgent need for strategic investments and policies that can foster resilience against the backdrop of global uncertainties and climate challenges, paving the way for improved economic opportunities in the Pacific.
These findings suggest a cautious yet hopeful outlook for the Pacific economies, as addressing gender disparities in the labor market and implementing sound economic strategies could lay the groundwork for recovery and growth in the coming years.
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