'Slow but sure' economic rise in most of Pacific - World Bank

The Pacific regional economy is growing, slowly but surely, reports the World Bank.

In their latest Pacific update, released 17 June, they argue for more employment of women to help the economy amidst global economic uncertainty, turbulent trade policies and natural disaster recovery.

The World Bank's twice-yearly Pacific economic update covers 11 Pacific island economies: Federated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Palau, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

Speaking to an online conference, a World Bank spokesperson said that greater participation by women in the workforce could increase economic growth across the Pacific by 22 percent in the long run.

"Female labour force participation remains stubbornly low despite job creation; less than 43 percent of women in the Pacific are active in the labourforce... We're talking about access to a talent pool of half a million women.

"To put this into perspective, that is not a marginal improvement - that has transformational economic potential."

The spokesperson said for families, this means higher household incomes that creates buffers against economic shocks - something Pacific island nations are all too familiar with.

It also represents a great deal of growth potential without the need for government spending, the spokesperson said.

World Bank forecasts optimistic, lead author says

The economic story of the Pacific post-Covid has been a slow climb upwards, but a climb nonetheless.

That's according to senior economist Eka Vashakmadze, who told RNZ that lower levels of global growth are pushing Pacific growth downward, but not very significantly.

"We have been projecting that growth is normalising towards trend levels, but now we are revising it down because the global forecast has been revised down."

The Bank forecasts regionwide growth of 3.8 percent in 2024, slowing to 2.6 percent in 2025 and 2.8 percent in 2026.

The 2025 and 2026 forecasts have been downgraded slightly since October 2024: -0.8 percent and -0.2 percent respectively.

This is because the Pacific economy is less affected by global trends that would impact the developed world, Vashakmadze said.

"That being said, the region will still be growing... The question now is how strong witll the growth be going forward."

The Bank defines two broad categories of Pacific Island nation: tourism and remittance led, and sovereign rent-led.

Depending on the income source that an economy relies on, global shocks like trade tariffs are cushioned.

Sovereign-led can include anything from Micronesia's fishing license fees, to Nauru's passport sales, to Tuvalu's TV domain.

These economies have benefitted from improved grant financing and aid flows from developed countries. Broadly, their revenue not derived from tax has increased between 2023 and 2024, the Bank reported.

For tourism and remittance economies, growth depends more on the overall economic performance of high-income nations, whose citizens must be willing and able to spend. This is where moves such as tariffs or inflation could affect the Pacific indirectly.

Here, economies like Palau, Samoa and Tonga have done well, experiencing broad growth of 5 percent in 2023 and 2024, according to the report.

Samoa in particular has thrived, profiting off massive tourism activity and remittance flows from Australia and New Zealand, growing 11.4 percent in 2023, and 9.8 percent in 2024. It will, however, grow by 5.3 percent this year.

Vashakmadze said that is creating momentum across the region.

"At the moment, we have not seen major shocks to those sectors, but of course we are anticipating some softening.

"Finally, after there was normalisation of trade, that is only when reconstruction started, clearly providing a boost for those countries."

Too many eggs in one basket?

While tariffs may cause a bruise, an economic shock that hits directly at a key revenue source can show devastating results, Vashakmadze said.

"The exposure to shocks is very different, and the composition of this exposure is not only the impact of the shock, but the ability of the country to respond to the shock... This is very different country by country."

High rents can hide underlying economic issues stemming from lower productivity, export receipts, or employment, all of which have an impact on tax revenues which the state would become reliant on should rents go the other way.

As natural hazards linked to climate change grow in size and frequency, island nations are forced to borrow more, leading to larger debt with less ability to pay it back.

Vashakmadze said that as a result, the World Bank focuses on debt sustainability.

"For example, you will see that Tuvalu's debt is pretty low... but because the country is at very, very, very high risk of natural hazards, than we would still characterise this country as high risk.

"So it's not about the absolute level, but more about the combination of debt levels and susceptibility to shocks."

Public debt levels have trended downwards for sovereign rent-led economies since 2018, while remaining stubbornly high in tourism and remittance led economies, the Bank reported.

A nation that would seem to embody all of these warnings is Vanuatu.

With a devastating earthquake in 2024 and the collapse of their national airline, Vanuatu's ability to accomodate tourists has been crippled, the Bank reported.

"Vanuatu is expected to experience a deterioration in its fiscal deficit, owing to declining revenues from the Economic Citizenship Program and the VAT, as well as increased expenditures, including transfers, support measures, construction expenditure, and one-off costs from the liquidation of Air Vanuatu."

Revenues are expected to climb back around 2027, making Vanuatu the only economy expected to see a decline in growth in 2025, of around 1.8 percent.

Female participation in workforce massive untapped potential

For senior social development specialist Helle Buchhave, there's no one barrier to women's labour force participation.

"Norms is one of the barriers that we highlight. Another one is the absence of robust institutions and family-friendly policies."

The Bank reported that gender norms in the Pacific have stood the test of time, as many island cultures uphold women as caregivers and homekeepers, and thus are concentrated in lower-skill industries.

Fiji, the largest island economy, is the only nation in the region to have developed maternity leave and childcare policies that would accomodate female workers, Buchhave said.

"Coordination action across laws and workplaces are needed... The critical entry points are supporting working families, building skills, and aligning skills with sector demand."

It ultimately presents as a low-cost, high-return option that would help economies become more productive and less reliant on tenuous sources of revenue, and the risks they pose, the Bank said.

"It's not about whether the region can afford this; it's about whether they can afford not to."