The Asian Development Bank (ADB) has reported that tourism is anticipated to remain a significant catalyst for growth in the Pacific region. According to the latest Asian Development Outlook, the growth forecast for Developing Asia in 2024 has been slightly raised to 5 percent and is projected to stay at 4.9 percent for 2025. The growth estimation for the Pacific has been increased to 3.4 percent, primarily fueled by the rise 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.
For 2024, the Pacific is expected to grow by 3.4 percent and by 4.1 percent in 2025. However, the report notes ongoing challenges such as limited fiscal space and significant debt distress that could hinder progress. The economic outlook for the Pacific largely hinges on Papua New Guinea (PNG) and Fiji, which together contribute to 90 percent of the subregion’s GDP.
The growth forecast for PNG has been revised downward for both 2024 and 2025 due to lower projected output in the resource sector. Nevertheless, this decline has been counterbalanced by stronger-than-expected growth in other economies, particularly in Fiji, where robust tourist arrivals and higher government expenditure exceeded prior estimates.
The projected GDP growth for PNG in 2024 is now 3.2 percent, slightly less than the previous forecast of 3.3 percent made in April. This adjustment is attributed to decreased production of liquefied natural gas, gold, and nickel in the first half of 2024.
Looking ahead, the anticipated recovery of businesses impacted by social unrest and the impending initiation of the multi-billion-dollar Papua LNG project in 2025 are expected to boost investment and economic activity. However, ongoing issues in resource extraction continue to limit growth prospects.
In Fiji, higher-than-expected visitor numbers and fiscal measures anticipated to stimulate economic activity are expected to result in a 3.4 percent growth in 2024, up from the previously estimated 3 percent in ADO April 2024.
The report also indicates improved growth projections for the Cook Islands, Kiribati, Nauru, Samoa, and Solomon Islands compared to earlier forecasts. Growth in the Cook Islands has been propelled by tourism, while increased public wages in Kiribati have significantly boosted domestic demand. The reopening of the Regional Processing Centre has contributed to Nauru’s upgraded forecast, and sustained tourism and remittances should support growth in Samoa. Revisions in data have influenced the growth outlook for the Solomon Islands.
Conversely, growth forecasts for Tonga in 2024 have been lowered due to El Niño’s impact on agriculture, and Vanuatu’s forecast has declined because of the negative effects stemming from the suspension of Air Vanuatu operations.
Despite these projections, the ADB cautioned that numerous challenges to future growth remain in the region, such as natural disasters and labor shortages, alongside fiscal constraints and debt distress. According to the International Monetary Fund, debt distress occurs when a country cannot meet its financial commitments and requires debt restructuring. Currently, seven of the 14 developing member nations in the Pacific are at high risk of debt distress, including Kiribati, the Marshall Islands, PNG, Samoa, Tonga, Tuvalu, and Vanuatu. The other seven nations are classified as having a moderate risk of debt distress.
Additionally, the ADB has signed a grant agreement with the Marshall Islands worth $52.5 million to enhance urban services in Majuro and Ebeye.