Growth To Slow Sharply In Pacific This Year: ADB

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Tuesday, the Asian Development Bank revised its growth prospects for the Pacific region that includes 14 island economies, citing erosion in tourism revenues and remittances due to the global economic slump.

In an update to its flagship publication Asian Development Outlook, the Manila-based bank projected the region's growth to slow to 2.8% in 2009 from 5.2% last year. Thus, the lender slightly downgraded its March estimate of 3% for full year growth and attributed it to the less optimistic forecast for Timor-Leste.

Growth is seen only for the Pacific's mining and petroleum exporters. Papua New Guinea's full-year growth forecast for 2009 was revised up slightly from March, to 4.5%. The upgrade came as export earnings benefit from a faster than anticipated recovery in key commodity prices, the report said.

The forecast for Vanuatu was also revised up, to 4%, reflecting strength in tourism and signs of an improvement in domestic demand. Meanwhile, the growth outlook for Timor-Leste, the other major economy in the region, was sharply lowered to 8% from 12%. This was after the nation trimmed public spending to more sustainable levels since the easing of world oil prices.

However, the economies of the Cook Islands, Fiji Islands, Palau, Samoa, and Tonga were all projected to contract, while Solomon Islands is expected to record no growth as log exports are declining sharply, the lender said. Director General of ADB's Pacific Department, Hafeez Rahman, observed that the pacific region will benefit from improved prospects in the international economy, and said a modest recovery in the region is achievable going into 2010.

In 2010, the region is expected to grow 3.1%, better than the March forecast of 2.7%, led by its two biggest economies, Papua New Guinea and Timor-Leste. These two economies are expected to be bolstered by higher average global oil and mineral prices. Excluding them, the region is likely to expand just 0.8% next year, the ADB said.

The Pacific's inflation is forecast to slow to an average 6.1% this year, down from 9.5% in 2008. However, the report warns that a recent rise in crude oil prices may push up inflation in the remainder of the year. Inflation is seen at 5.2% next year.

Tuesday, the Asian Development Bank revised its growth prospects for the Pacific region that includes 14 island economies, citing erosion in tourism revenues and remittances due to the global economic slump. (Market News Provided by RTTNews)