Pacific Economic Update, October 2024

amid Global Uncertainty:Ramping up Investmentin the PacificPublic Disclosure Authorized Octobr 2024Public Disclosure Authorized Public Disclosure Authorized Th Pcific Economic Updt provids nlsis of 11 Pcific islnd countris (PIC-11):Fdrtd Stts of Micronsi (FSM), Fiji, Kiribti, Mrshll Islnds, Nuru, Plu,Smo, Solomon Islnds, Ton, Tuvlu, nd Vnutu. Preface and Acknowledgements The Pacific Economic Update (PEU) is a semi-annual publication that informs business leaders, citizens, internationalpartners, and policymakers about economic trends and key development issues in eleven Pacific Island countries (PIC-11): the Federated States of Micronesia (FSM), Fiji, Kiribati, Marshall Islands, Nauru, Palau, Samoa, Solomon Islands,Tonga, Tuvalu, and Vanuatu. Part One provides an overview of recent economic developments, outlook, and risks.Part Two examines investment trends and offers policy recommendations to revitalize investment strategies, bolstereconomic resilience, and foster sustainable growth. This edition of the Pacific Economic Update (PEU) was led by Ekaterine Vashakmadze (Senior Economist), VisheshAgarwal (Economist), and Warunthorn Puthong (Economist). Guidance was provided by Stephen N. Ndegwa (CountryDirector), Lalita Moorty (Regional Director, EFI), Lars Christian Moller (Practice Manager, MTI), and Ralph Van Doorn(Lead Economist, EFI). Stefano Mocci (Country Manager), Annette Leith, and Omar Lyasse (Resident Representatives)offered additional insights. Part 1 was prepared by Ekaterine Vashakmadze, Vishesh Agarwal, and Warunthorn Puthong, with contributions from ateam including Lodewijk Smets, Mehwish Ashraf, and others. Part 2 was prepared by Ekaterine Vashakmadze, KerstenKevin Stamm, and Dana Vorisek, with contributions from Vishesh Agarwal, Marie Christine Apedo, Nina Doetinchem,Slavena Georgieva, Alvaro Gonzalez, Rafaela Martinho Henriques, Anuja Kar, Christopher Miller, Amina Jarso Mokku,Jiyun Park, Ximing Peng, Rajesh Rohatgi, and Mariano Salto. Communications support was provided by Hamish Wyatt, Vika Waradi, Graeme Litter, and Peter Howe. Bridgette Hoganand Claudia Palic provided overall project support. The team appreciated feedback from Amat Adarov, Ibrahim SaeedChowdhury, John Nana Darko Francois, Samuel Christopher Hill, Ergys Islamaj, Jeetendra Khadan, Marshall Mills, IvanAnton Nimac, Francesco Strobbe, and other contributors. The report was edited by Angela Takats, with document designby The Greenhouse Studio. © 2024 The World Bank1818 H Street NW, Washington DC 20433Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved. This work is a product of The World Bank. The findings, interpretations, and conclusions expressed in this work do notnecessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and doesnot assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the useof or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations,links/footnotes and other information shown in this work do not imply any judgment on the part of The World Bankconcerning the legal status of any territory or the endorsement or acceptance of such boundaries. The citation of worksauthored by others does not mean the World Bank endorses the views expressed by those authors or the content oftheir works. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges andimmunities of The World Bank, all of which are specifically reserved. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge,this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work isgiven. Attribution—Please cite the work as follows: “World Bank. 2024. Pacific Economic Update. Diminishing Growth amidGlobal Uncertainty: Ramping up Investment in the Pacific © World Bank.” Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, TheWorld Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Contents Preface and AcknowledgmentsAbbreviations and AcronymsList of FiguresList of TablesList of BoxesExecutive SummaryPart 1. Economic Overview: Short-term Resilience and Persistent Long-termChallenges in the Pacific1.1 How Does the Global Economic Context Affect the PIC-11?1.2 Recent Economic Developments and Near-term Outlook in the PIC-111.2.1 Growth1.2.2 Inflation1.2.3 Fiscal and Debt Dynamics1.2.4 Monetary Policy and the Financial Sector1.2.5 External Sector1.3 Medium-term Growth: Substantial Output Losses and Slow Income