Bleak economic outlook for 2010

[posted 18 March 2010, 1530]

The Asian Development Bank (ADB) says Fiji’s economy is expected to contract in 2010.

This is a correction of its previous forecast (Nov 2009) when the Bank projected a modest growth of just under 1%.

In a statement on Pacific Economies released on March 2, the Bank says that … “Of all the Pacific island economies, only the Fiji Islands and Palau are expected to contract in 2010.”

The statement follows the publication of ADB’s first issue for 2010 of the Pacific Economic Monitor, a quarterly review of 14 Pacific Island countries and Timor-Leste.

The report notes that the Pacific island economies are expected to expand by 0.5% overall in 2010, after contracting by an estimated 1.4% in 2009. This growth, however, excludes the economies of Fiji and Palua which are expected to contract. Vanuatu is credited as the best performing Pacific Island economy, bolstered by recent improvements in its economic policy.

According to the report, many Pacific island States are still feeling the impact of the economic slowdown on their tax revenue, resulting in fiscal pressures remaining a cause for concern. It names Fiji as one of the five countries where such pressure is intense.

The ADB publication says many families in the Pacific region are likely to face declining incomes as labour markets weaken because of the economic slowdown:

“The working poor, those that have a job but earn too little to meet their basic needs, have been more exposed to the economic slowdown than others as construction, manufacturing, retail and wholesale activity weaken and as smallholder incomes decline.”

The risk faced by the vulnerable has been heightened by weak government revenues because of the “resulting pressure on the delivery of services,” the report says.

In its November 2009 issue, the Monitor shows Fiji at the bottom of the performance list in the Pacific island region with extremely low growth rate and the highest inflation (7%) among the 14 countries covered.