Taking the Helm A Policy Brief on A Response to the Global Crisis

Abstract

The global economic crisis has hit the Pacific. Lower commodity prices will see export incomes decline, and tourism income and remittances are expected to fall as source economies experience economic recession. Most of the region’s public offshore investment funds have declined in value, and some large private sector operations dependent on offshore demand and funding are at risk. The growth forecasts for most Pacific countries have been progressively downgraded as the depth of the global economic crisis has become more apparent. The economies of the Fiji Islands, Federated States of Micronesia, Palau, Samoa, and Tonga are now projected to contract in 2009. Economic growth is likely to be low elsewhere, the only exceptions being Papua New Guinea, Timor-Leste, and possibly, Vanuatu. Even if the global economy turns around in the second half of 2010, lags mean that conditions will probably be tough in most Pacific economies into 2011. Governments need to decide if the global economic crisis is a priority for economic management. If so, a proactive, targeted, and coherent policy response would be best. This should be tailored to the individual circumstances of each Pacific economy.