Page 27 - IB August 2020

Economy Economy

Economic growth in the Pacific: pre- and post-COVID

Source: ADB Pacific Economic Monitor, July 2020 and ADO 2019 Update; various country documents

Continued from page 19 Tonga, of these three we’re not seeing an increase in aggre-
gate expenditure, it’s not realistic to expect these countries
financed stimulus packages funded entirely by their own to restructure and cut other expenditure.”
resources (earnings from a sovereign wealth fund and a
citizenship scheme respectively). “That has generated a lot To view the Pacific COVID Economic Database visit https://
of revenue in recent years and that has been sitting there devpolicy.org/
offshore. It’s ideal funding for emergencies,” Howes says.
He says a second ‘aid-finance’ group, (consisting of Tonga, editor@islandsbusiness.com
Samoa, Solomon Islands ) is spending about the same amount
as it is receiving in assistance from external donors. The
third, “constrained” group is Fiji and Papua New Guinea.
“These are countries that went into the crisis already run-
ning a deficit and there are limits on how much more they Island
can borrow. In fact in the case of PNG, our own projection Community
is that they’re not going to be able to borrow any more than Farming
was originally budgeted for and a very large deficit. Even
if they can, they‘ve got big revenue shortfalls they have to
fund. Grant aid is not that important for these economies so
there is a limit to their ability to fund COVID spending. It’s
the same story for Fiji. Fiji is definitely borrowing more, but
it has got this massive revenue shortfall, so its first priority
has got to be to meet that, and that squeezes out room for
additional spending.
“PNG and Fiji are exception for the Pacific, but they are Reseed reefs with “farmed” giant clams from Atoll Beauties exported to the world.
Tridacna maxima, Tridacna gigas, Tridacna Squamosa, Hippopus Hippopus
pretty typical of developing countries. The other countries
with access to reserves and foreign aid are able to put to-
gether more generous packages,” Howes said.
He said available information shows the biggest spend in
COVID packages is on safety nets, something that Pacific
countries are often criticised for not investing enough in.
Looking at the three countries (Fiji, Samoa and Tonga)
that have delivered budgets for 2020-21, Howes says: “In the
short term most Pacific countries have done a good job of
putting in place a reasonably generous COVID funding pack-
age, but longer term we see countries are going to struggle
and certainly countries should be increasing those safety Atoll Beauties
nets. The question becomes, where are they going to get PO Box 384,
the funding from. They’re already anticipating an increase Bikenibeu, Tarawa, Kiribati
in aid, they’re borrowing where they can, and yet except for atoll.beauties@gmail.com

Islands Business, August 2020 27