ADB predicts strong growth for Pacific economies
The Asian Development Bank is forecasting a 9.9 percent growth in the Pacific economy in spite of of severe natural disaster events in the start of the year.
The Asian Development Bank is forecasting a 9.9 percent growth in the Pacific economy this year.
The ADB's Senior Economist for the Pacific, Christopher Edmonds is the lead Author of the Bank's Pacific Economic Monitor report which was released on Wednesday. (16-07-15)
He says the outlook is a very positive one for the region given the number of severe natural disaster events occurring earlier in the year.
CHRISTOPHER EDMONDS: So regionally we are forecasting just under 10 percent growth for the Pacific region in 2015 and that is largely being driven by the first full year of LNG exports from PNG. But we see good performance in a number of the economies. With the downside being a few of the economies have really been. Had seen their economic activity fall off as a result of very severe natural disasters in particular Vanuatu as a result of cyclone Pam and FSM as a result of another Typhoon.
KOROI HAWKINS: Maybe focusing first on Papua New Guinea, such a huge project how much of an impact must that project have on the country to be having an impact on the overall regional outlook?
CE: Sure, I mean part of it is almost anything that happens in PNG, at a regional level has a large impact on Pacific growth just because it has such a large weight in the total regional growth average about a 65 percent weight. And it is actually in fact a few years ago the construction of this LNG pipeline through the highlands into Lae port had a huge effect on the economy and was also pushing up Pacific growth during those years. That pipeline was completed last year and they started the initial, they had their initial exports of Liquid Natural Gas last year but this is the first year of full exports of exports of LNG from PNG and its pushing the growth very high, much higher so that 9.9 percent growth. Although that is actually probably less than what was anticipated earlier because of the low energy prices prevailing on global markets these days.
KH: Right and as you say a huge weight in the regional economy there. If you take PNG out of the picture how are the other countries looking?
CE: So I mean again, generally pretty well although these economies tend to grow at much lower rates. So I mean the Pacific region breaks down into a few, a couple of resource exporting countries that have experienced higher growth in particular PNG and Timor Leste which is included in ADB's Pacific region. The other economies are driven by a more diversity of factors. In particular a lot of them are tourism dependent economies. Especially like New Zealand's neighbour and sister economy of Cook Islands but also some of the economies in the North Pacific in particular Palau. And actually over the last two years tourism has been performing very well in these economies. Particularly in regards, in relation to increased outflows to, of visitors from mainland China.
KH: Now looking at Vanuatu and those countries affected by Cyclone Pam in March. How much of an effect has that cyclone had on their economies?
CE: The impact of Cyclone Pam in Vanuatu it was the more severe of the two events and it is estimated to have caused the equivalent of about 64 percent destruction of the national GDP. So in average annual GDP. So that is a massive destruction. And all, most of the main export crops of Vanuatu have been destroyed so they will need to be replanted. Tourism is another large sector of the Vanuatu economy and obviously that was disrupted quite severely by the cyclone. At the same time there is actually an excellent report on, giving a very detailed assessment of current developments with respect to the recovery. And in general I would say the news is very positive in terms of the Vanuatu people to the event. The fact that they have lived with disasters a long time. In other words it looks like the economy is probably coming back a little quicker than expected. Be that as it may it is still the case that prior to the cyclone ADB was seeing about three percent growth for this year. And following the cyclone we are actually still predicting a 0.5 percent decline in growth. So the economy is seen to shrink this year. Although as is typical around Pacific and elsewhere usually as a result of the reconstruction spending, we often see an increase in growth in the years following.
KH: Now what can policy makers leaders in the region take from this report? What can they use it for?
CE: So I mean the main thing we were looking at. So I think the initial part of the report sort of looking at the likely impacts of international developments on the Pacific region can be useful. So we do point out a number of what we call downside risk to the growth forecast arm so I think that is a useful thing. I think it is useful often for the policy makers in the region to have the nice compilation of data that the report offers as well as an assessment of sort of what is going on in terms of policy changes and economic challenges across the region. The other thing that I would point to is of course the fiscal and economic impacts of disasters which you know sadly has become and is likely to continue to become a major issue for the Pacific region. This is a real concern and it leads to the need to try to spend much more money on disaster efforts and anti-efforts to reduce the impacts of these disasters. You know analysis shows for every dollar you spend on the efforts to make your infrastructure resistant to disasters, you know there is anywhere between four and sixteen dollars of savings once the disaster hits.
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