CHAPTER 4. SUBREGIONAL VARIATIONS: PERFORMANCE AND POLICY RESPONSES
ready started in 2007 as major infrastructure projects were completed, private sector investment slowed and consumer demand weakened. The phosphate industry, which is being rebuilt, will be affected by movements in the phosphate price and the Australian dollar. Economic growth in Palau slowed to 3.0% in 2007, as major infrastructure projects were completed, privatesector investment slowed and consumer demand weakened. Trade, public administration and construction accounted for more than half of Palau’s total output in 2007. Growth was expected to further moderate to 2.5% in 2008 as the global economic downturn was expected to weaken tourism and jeopardize the financing of planned resorts.
The global financial crisis indirectly affected economic performance in countries of the Pacific in 2008
Papua New Guinea’s growth rate rose from 6.7% in 2007 to an estimated 7.3% in 2008 as mining expanded and the prices of commodity exports rose, promoting growth in non-mining sectors. Agriculture was expected to grow in 2008 as higher global prices for cocoa and copra raised household incomes. But declining production was expected to lower the contribution from the petroleum sector. The transport sector was expected to grow in 2008 due to the rehabilitation and development of infrastructure while the mining sector fuelled expansion in the building and construction sector. Growth in telecommunications was also expected to exceed projections, as the liberalization of the mobile-phone market led to a substantial increase in the number of subscribers and lower prices for calls in 2008. Liberalization of Papua New Guinea’s international air transport market was expected to boost tourism. The tourism industry is constrained, however, by concerns with law and order. The country’s economic expansion has been supported in large part by increased Government spending and growth in private sector credit. Although formal private sector employment rose by 8.4% between March 2007 and March 2008, urban unemployment was estimated to remain at around 40%. Samoa’s economy grew by 6.1% in 2007, led by expansion in its agricultural and industrial sectors. Tourism and construction of public sector projects and hotels in preparation for the South Pacific Games in September 2007 boosted growth in the services sector, which accounted for three fifths of total output. Economic growth was expected to slow to 3.3% in 2008, with the slowdown in construction after the
Games. The courts and administration complex and a proposed Government complex and convention centre are the only current major construction works. Liberalization of the telecommunications sector was expected to boost growth in the services sector in 2008. A high level of migration and consequent high levels of remittances, allows Samoa to maintain high income growth in per capita terms. Although the labour force increased slightly, the number of employed Samoans as well as the unemployment rate remained unchanged. Given the global economic slowdown, tourist arrivals in 2009 are expected to be lower than forecast, and expansion of tourism-based investment was expected to slow. Despite falling from 10.3% in 2007 to 7.0% in 2008, the rate of economic growth in the Solomon Islands was the highest among countries in the Pacific. Despite such growth, per capita income in the Solomon Islands remains among the lowest in the Pacific. The earthquake that hit the country in April 2007 had a negligible impact on economic growth, given the dependence on subsistence in large parts of the economy. Two major sources of economic growth are timber exports and tourism. Timber exports accounted for two thirds of total exports in 2007. Because current logging rates are estimated to be five times the sustainable rate, exports could start to decline by 2010. Reliance on this sector therefore presents a risk for the Solomon Islands. The tourism sector grew by nearly 50% between 2003 and 2008 due to recovery from earlier civil unrest and increased political stability. Relaxation of Government controls on international air transport was expected to promote further growth in the services sector. Improved infrastructure and deregulation of island shipping, domestic air services and telecommunications could further ensure development of tourism as well as other sectors of the economy. The economic contraction in Tonga of 0.3% in 2007 was less than anticipated, despite the slowdown in industry, commerce and tourism. The economy was expected to grow by 1.0% in 2008, as reconstruction of the central business district of Nuku’alofa supports economic recovery. Tourism receipts rose by more than 70% in 2008, while tourist arrivals rose by more than a quarter to an estimated 67,000 visitors, primarily from New Zealand, Australia and the United States, as arrivals by cruise ships increased by two thirds over the figure for 2007. Although the economy was expected to continue growing slowly in the medium term, the expected slowdown in remittances and tourism could adversely affect its prospects. Reconstruction of Nuku’alofa, coupled with construction of a hotel in Vava’u, was expected to boost the construction sector in 2009.
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