Pacific's slow recovery from recession

Pacific countries are clawing their way back from the recession but trade and tourism from New Zealand and Australia is expected to be lacklustre, the Asian Development Bank reports.

Pacific Island economies would expand by 0.5 per cent this year after contracting an estimated 1.4 per cent last year, the ADB said.

Many Pacific governments were still feeling the pinch in their tax revenue, although some were budgeting for higher social spending. They needed development partner support to ensure that spending was achieved, the bank said.

Vanuatu was expected to be the best performer, bolstered by recent improvements to economic policy.

Growth was expected to rise slightly in resource-rich Papua New Guinea, lifting the overall growth rate in the Pacific to 3.7 per cent from 2.4 per cent.

Inflation was forecast to stay high at an average 5.4 per cent.

Only Fiji and Palau were expected to contract economically this year. Fiscal pressure was "intense in Fiji, Kiribati, Samoa, Tonga, Tuvalu, the Solomons and the Marshall Islands".

Tourism from New Zealand to the Pacific rose slightly late last year as people returned to Fiji but was expected to decrease this year as Kiwis opted for domestic holidays. The number of trips from New Zealand to Fiji was expected to fall about 4.3 per cent. No growth was forecast for the Cook Islands.

Tourism from Australia grew solidly during the second half of last year but the ADB said this had largely dissipated, although Fiji was expected to retain moderate growth.

During the recession, the ADB said the Pacific's working poor had been the hardest hit. "Starting from a position of vulnerability, their incomes are likely to have declined further wherever construction, manufacturing, retail and wholesale activity have weakened."

Families dependent on overseas remittances, including from New Zealand, were also likely to have felt the downturn keenly. A slight rise in international food prices and higher transport costs were expected to hurt household incomes and consumption.

Non-fuel exports from New Zealand to Fiji, Palau and the Cook Islands slowed late last year as those countries struggled to recover. Non-fuel exports from Australia to the Pacific had held up, mostly due to demand from Papua New Guinea.

- © Fairfax NZ News