Papua New Guinea, Timor Leste stand out in slowing Pacific economy


Growth across the Pacific region is expected to slow slightly during 2013, with Timor Leste, Papua New Guinea and Nauru the outstanding performers, according to a mid-year review by the Asian Development Bank.

Vanuatu. Credit:

Vanuatu. Credit:

The bank’s July Pacific Economic Monitor, released last week, forecasts regional growth of 5% for 2013, compared to 7.6% in 2012. Notably, however, if PNG (5.5% growth) and Timor Leste (9.5%) are left out, growth among the remaining Pacific countries is expected to be just 2%, down from 2.5% in 2012.

By comparison, the ADB predicts developing Asian economies will grow by 6.6%, while Australia’s GDP growth for 2013 is expected to be 3% and New Zealand’s 2.7%. The International Monetary Fund predicts that the world economy as a whole will grow by 3.3%.

Pacific Islands GDP growth projections for 2013

Source: Asian Development Bank

Country Projected GDP growth
Cook Islands 3.2%
Federated States of Micronesia 1%
Fiji 2%
Kiribati 2%
Marshall Islands 2.3%
Nauru 4.5%
Palau 3%
Papua New Guinea 5.5%
Samoa 0.9%
Solomon Islands 2.5%
Timor Leste 9.5%
Tonga 0.5%
Tuvalu 1.3%
Vanuatu 3.2%


The ADB’s medium-term outlook suggests Pacific region growth will improve to 5.5% in 2014, partly driven by the commencement of gas exports from PNG.

PNG ‘broadly positive’

While the ABD report notes an economic slowdown in PNG, citing declining cement imports as one indicator of slower construction activity, it emphasises PNG’s ‘economy remains robust’ and that its medium term outlook ‘remains broadly positive’. Other indicators, such as new car imports from Japan, and chicken and flour imports from Australia, are rising to ‘new record levels’.

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‘Authorities will either have to cut spending or find additional funding to maintain the deficit at the planned levels’

The ADB predicts GDP growth for PNG of 6% in 2014—a slight rise. However, falling commodity prices are a dark cloud on the horizon for future National Budgets.

‘Authorities will either have to cut spending or find additional funding to maintain the deficit at the planned levels,’ warns the report.

Nevertheless, the ADB also highlights recent Bank of Papua New Guinea calculations that suggest that ‘counter cyclical fiscal policy’ (in other words, the PNG Government’s decision to go into deficit to fund additional infrastructure and education spending) ‘could contribute up to 2% of real output growth in 2013’.

Increasing trade with Asia

The latest Pacific Economic Monitor also highlights the Pacific region’s growing trade with the ASEAN states, India, and China (collectively referred to as ACI).

‘South Pacific trade with ACI increased by an average of 19% annually between 2000 and 2011, faster than the 12% growth recorded by trade with Australia and New Zealand during the same period,’ it notes.