Samisoni Pareti




The latest report of the Asian Development Bank (ADB) shows that claims by Cook Islands that it’s the world’s first recession free nation only exists in its travel brochures.
“Latest data point to a continuation of weak economic conditions,” noted ADB’s Pacific Economic Monitor (PEM) for August 2009.
“Compared with the same quarter in 2008, in the March quarter of 2009 lending to business was down 2.8%; the volume of air cargo imports was down 41.8%; and car and truck registrations were both down more than 40%.
“The volume of air cargo exports (mainly fish) is now around 10% of 2005 levels.
“April and May data on key imports point to continuing weak demand.
“Underlying tax revenue collections were down about 3.5% in 2008/09 (they normally rise every year).”
ADB says the feeble conditions came amidst a “moderate improvement” in residential construction and a 7% rise in visitor arrivals for March to May this year compared to the same period in 2008.
Arrivals particularly from tourist source markets of Australia and New Zealand have picked up, the bank’s PEM observed, some proof that the impact of the global economic crisis on these two major economies are possibly bottoming out.
“Total visitor arrivals and the economy will receive a boost in the second half of 2009 from a different kind of tourism, via the Pacific Mini Games and other sporting events and conferences.
“However, these are short-lived one-time events and are unlikely to reverse the underlying weakness in the economy.
“High inflation is adding to economic stress by eroding purchasing power; inflation remains high at 11.2% on a year-on-year basis as of June 2009.
“The contraction in the real economy could have been as much as 3% in 2008, and a further contraction is possible for 2009.”
It’s predicting a negative growth for the Cooks’ economy this year.
ADB’s latest PEM seems to indicate too that Samoa has lost its star performance as an economic powerhouse in the region.
It said slow growth was inevitable following the end of the “mini-boom” in construction and the “loss of jobs” at Yazaki’s large manufacturing operation.
The Asian company runs a large car parts manufacturing factory in Apia.
These redundancies unexpectedly pushed Samoa into recession, the PEM says. This is aggravated by a decline in remittances, weakening tourist numbers and the erosion of purchasing power by high inflation.
“GDP in the September quarter of 2008 was 8% below the same period of the previous year, the December quarter was down 7.3% over the previous year, and the March quarter of 2009 was down 4.3%.
Tourist numbers are, however, showing greater improvement, and the restructure of Polynesian Airlines, development of major hotels and the filming of the Survivor reality television show in Samoa will boost growth in tourism this year.
But the bank says this won’t be big enough to cancel out the negatives brought about by the job losses at Yazaki and at the two canneries in neighbouring American Samoa.
Commercial bank lending to the private has hardly changed since late 2008.
“2008/09 will record a large economic contraction. This is, however, expected to be the bottom of the downturn, primarily because of a large fiscal expansion provided for in the 2009/2010 Budget.
“Some of the fiscal expansion is for projects that use few local products or services and offer little help to the economy, but others—notably expanded road works—have the potential to boost the economy.”
In fact, the ADB’s PEM for August is projecting negative growth for Samoa, Cook Islands, Tonga, Palau and Fiji, and zero growth for Solomon Islands in 2009.
For the coup-stricken nation of Fiji, the ADB has again revised the projected decline of its economy this year.
In its first PEM released in May, the bank was saying the Fiji economy could decline by 0.5%.
Its PEM for August is now predicting a negative 1% growth.
Significant downside risks for Fiji are the “weak economies of major trading partners; rising fuel prices; significant contraction in tourism earnings; underlying structural constraints that continue to restrict export growth, particularly for sugar and garments; and  implementation of major public works.”
Its warning that perceived gains in the 20% devaluation of the Fiji dollar in April could be lost through rising inflation, falling exports and worsening debt levels.
The bank says year-on-year inflation rate stood at 5% in June 2009 and predicts it will worsen to 9.5% by the end of the year and rises still to around 13.5% in mid-2010 before easing.
Papua New Guinea, according to the ADB’s PEM, seems to be the only star performer by August.
Prices of commodities in the world market have recovered boosting as a result the country’s exports receipts.
As the end of May this year, PNG’s international reserves were US$2.2 billion, which was enough to cover 14 months of the country’s “non-mineral” imports.
“Despite the recent pick-up in commodity prices, there remain downside risks to government revenue forecasts,” says the ADB.
“Fiscal pressures are expected to build as the government comes under pressure to quickly implement its additional priority spending programmes.
“Given public sector capacity constraints, fiscal discipline is important to ensure that trust fund savings are not drawn down too rapidly.
“Accumulated mineral windfalls are best safeguarded and directed towards a steady upgrading of infrastructure and basic service delivery, as outlined in the government’s medium-term development strategy.”
In spite of denial by the country’s finance ministry, the ADB is still sounding the warning bells about the Solomon Islands economy.
All its major exports of logs, fish, palm oil and copra declined by 11% in the first quarter of 2009, and the bank is predicting no growth for the nation’s economy by the year’s end.
“Inflation forecasts have been revised down to 8.3% for 2009 and 6.9% for 2010 as the economy slows.
“But inflation remains at risk of reaccelerating, particularly if the Government resorts to central bank financing.”