EMERGING FROM COVID-19
Emerging from COVID-19 the Pacific way…
Research supported by the Pacific Research Program finds the impact of COVID-19 is much more severe in the Pacific. It is less in any other region of the countries. While other regions at worst stayed still, the Pacific region contracted. In fact, they contracted more than 5 percent. Thus far, some regions or groups of countries had some growth. This was despite the pandemic.
The countries dependent on tourism were affected the most. They suffered double-digit losses. Countries like Fiji, Palau, and Samoa had staggering negative effects because of the pandemic. However, other Pacific region countries did not suffer such extreme contractions. Thus far, most of them recorded negative growth while some had no growth.
IMF projections
According to IMF projections, the Pacific region should grow an average of 5.3 percent. This will be over the next two years. Hence, the GDP in the region expects to reach its pre-pandemic levels. So, it means the Pacific has gone backward. This is in terms of per capita. In fact, the rest of the world outperforms the region. However, there is no guarantee that the projection may reach its full potential. Thus far, the new policy brief identifies major risks to growth in the Pacific. So, it enters the post-pandemic or ‘living with COVID’ era like any other country.
The Pacific economies remain vulnerable. There are external shocks from possible COVID outbreaks. These include inflationary pressures and the possibility of a global slowdown. So, any outbreaks in the future both locally and abroad may derail economic progress.
Vaccination achievements
So far, half of the Pacific countries have achieved the 70 percent vaccination goal. Thus far, three countries have very low vaccination rates. These are Papua New Guinea at 3 percent, the Solomon Islands at 26 percent, and Vanuatu at 42 percent. Hence, it is very concerning. It means a combined population of more than 10 million people is at high risk. In fact, there could be further outbreaks. Thus far, recurring outbreaks could be devastating. It may disrupt tourism recovery throughout the Pacific.
For example, despite reopening borders as early as April 2021, Palau is still struggling with its tourism industry. It is not recovering as a tourist destination from East Asia which is its main market. So far, people are either hesitant to travel or there are restrictions in place.
Domestic challenges
Domestic price levels increased marginally in most Pacific countries in 2020 and 2021. Inflation pressures now reflect in domestic prices too. Thus far, the Russia-Ukraine war and global stimulus policies are affecting the prices of most major commodities. These are causing the prices to skyrocket.
Most Pacific countries import commodities. Hence, they suffer. Commodity-exporting industries in a few Pacific countries benefit from rising resource prices. It includes Papua New Guinea and Timor-Leste. Global inflation may cause knock-on effects of the slowdown. It may be caused by other disruptions and central banks increasing interest rates to control inflation.
So far, major institutions like the World Bank, ADB, OECD, and IMF are downgrading growth forecasts. There is a warning of a global recession. As a result, tourism, Pacific trade, and remittances may all suffer. The biggest risk to post-COVID economic development for the Pacific is the return to slow growth.
Projection realities
Kiribati, Palau, Papua New Guinea, and the Federated States of Micronesia expect 2027 and 2019 levels to be identical. While Marshall Islands projection to 6 percent growth per capita income. Thus far, it projects Tonga and Fiji to achieve 9 percent growth. Moreover, the tiny island of Tuvalu is projected to grow 22 percent over this period. Hence, the possibility of Pacific countries being left behind is a wake-up call for the policymakers in the region.
In fact, it is a dire outlook. Hence, aid may be important. It may help cushion the ongoing COVID impacts. So, labour mobility strategies may continue to help the situation. Domestic economic reforms and prudent investment are now more important across the Pacific than ever before. There is no escaping this fact. It is a longer-term challenge.
