Pacific Island countries have not been immune from the economic impacts of the war on Ukraine, says World Bank’s Lead Economist for the Pacific, David Gould.
Gould in the World Bank’s inaugural Pacific Economic Update said the high global economic fallout associated with the war on Ukraine has led to a downward revision in growth forecasts for Pacific economies.
“Just as the Pacific was set to begin its post-pandemic recovery, it has been dealt another shock. Rising global energy and food prices have strained Pacific budgets, added to inflation, and ultimately increased the cost of living for families across the region.”
The report projects that inflationary pressures will peak in the first half of 2023, with consumer prices projected to fall in every Pacific Island country except Samoa, where inflation may reach as high as 12 per cent in the second half of the year, before falling in 2024.
The assessment provides an in-depth look at the challenges of fiscal and debt vulnerabilities faced by Pacific Island countries and how these were made worse during the pandemic.
It offers several recommendations that Pacific governments could consider to accelerate their recovery, enhance debt and fiscal sustainability, and further improve living standards across the region.
“COVID-mitigation measures led Pacific governments to expand spending. To reduce the likelihood of falling into a problematic debt situation, Pacific governments should now consider ways to sensibly reduce costs, and begin to responsibly unwind pandemic-era support,” said Gould.
World Bank Country Director for Papua New Guinea and the Pacific, Stephen Ndegwa said after three difficult years, the Pacific’s economic prospects are clearly improving.
He said while challenges remain, the Pacific is well placed to accelerate its post-COVID economic recovery throughout 2023 and beyond.
The World Bank works in partnership with 12 countries across the Pacific, supporting more than 95 projects totalling US$3 billion in commitments in sectors including agriculture, aviation and transport, climate resilience and adaptation, economic policy, education and employment, energy, fisheries, health, macroeconomic management, rural development, telecommunications, and tourism.