Excluding the economies of PNG and Timor-Leste, the Pacific Economic Monitor estimates the Pacific Island economies will grow by 1.7% this year, an improvement from the 0.8% expansion of last year.
"Overall, the Pacific economy is doing better thanks to improved world economic conditions," said Robert Wihtol, Director General of the ADB's Pacific Department. "However, this masks sharply different performances across the region. The resource-rich economies are well placed to record high rates of economic growth but the smaller and more remote economies are exposed to the costs from rising world fuel and food prices."
The report projects inflation of 4% in the Pacific Island economies (excluding PNG and Timor-Leste) this year and 6.5% in the Pacific as a whole. It warned of the risk of even higher inflation if global commodity prices remain at recent highs.
"Learning from the 2008 experience of high commodity prices, the Federated States of Micronesia, Kiribati, Marshall Islands, Palau, and Tuvalu are at most risk from the inflationary effect of higher world commodity prices," said Mr Wihtol.
The region should see an increase in tourism and some recovery in wage remittances this year on the back of an improved outlook for the economies of Australia and New Zealand, the source of most visitors and remittances to the Pacific. The Cook Islands, Fiji Islands, Samoa, Tonga, and Vanuatu stand ready to gain the most from these improvements.
