The Asian Development Bank (ADB) has announced that tourism is anticipated to remain a significant driver of economic growth in the Pacific region. According to the latest Asian Development Outlook, the growth forecast for Developing Asia in 2024 has been adjusted slightly to 5 percent, while the forecast for 2025 remains steady at 4.9 percent. For the Pacific, the growth forecast has been revised upward to 3.4 percent, spurred by an increase in tourist arrivals.
The term “Developing Asia” refers to the 46 member countries of the ADB, which includes 14 Pacific nations: the Cook Islands, Fiji, Kiribati, Marshall Islands, the Federated States of Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu. The Pacific is expected to expand by 3.4 percent in 2024 and by 4.1 percent in 2025, although challenges such as limited fiscal capacity and high levels of debt continue to exert economic pressure.
Economic advancements in the Pacific heavily rely on Papua New Guinea (PNG) and Fiji, which together account for 90 percent of the subregion’s gross domestic product (GDP). Forecasts suggest that growth in PNG will likely be slightly lower than previously estimated for both 2024 and 2025, primarily due to diminished activity in the resource sector. Nevertheless, this downturn has been counteracted by unexpected growth in other areas, notably in Fiji, where robust tourism numbers have surpassed expectations and government spending has increased.
For PNG, the projected GDP growth for 2024 is now 3.2 percent, a slight decrease from the 3.3 percent forecast made earlier in April. This adjustment is attributed to reduced production of liquefied natural gas, gold, and nickel in the first half of 2024. Future economic recovery in PNG could be bolstered by the resurgence of businesses affected by social unrest in January 2024, alongside the planned launch of the multibillion-dollar Papua LNG project in 2025, which is expected to stimulate investment.
In Fiji, visitor numbers have exceeded expectations, and the fiscal stimulus anticipated for 2024 is also expected to enhance economic activity, with an estimated growth of 3.4 percent in 2024, compared to the previously expected 3 percent.
The ADB report concludes that growth forecasts for the Cook Islands, Kiribati, Nauru, Samoa, and Solomon Islands have been revised upward since April, with improvements in tourism in the Cook Islands and increased public wages in Kiribati playing critical roles in domestic demand. The reactivation of the Regional Processing Centre has positively impacted Nauru’s economic forecast, while tourism and remittances are expected to support growth in Samoa, and revisions in data have led to adjustments in the growth outlook for the Solomon Islands.
Conversely, growth projections for Tonga in 2024 have been lowered due to the effects of El Niño on agriculture, and Vanuatu has seen a decline in growth predictions due to the suspension of Air Vanuatu operations.
Despite optimistic growth outlooks, the ADB has highlighted persistent challenges that could hinder future economic progress, such as natural disasters, labor shortages, and issues related to limited fiscal resources and debt distress. Currently, seven of the 14 Pacific developing member countries are classified as being at high risk of debt distress, according to the ADB, which identifies these countries as Kiribati, the Marshall Islands, PNG, Samoa, Tonga, Tuvalu, and Vanuatu. The other seven are at moderate risk, including the Cook Islands, Fiji, the Federated States of Micronesia, Nauru, Niue, Palau, and Solomon Islands.
Additionally, the ADB has entered into a grant agreement with the Marshall Islands amounting to $52.5 million to enhance urban services in the islands of Majuro and Ebeye.