Pacific island countries are exposed to significant risks from natural disasters. As a
disaster relief measure, Fiji allowed pre-retirement pension withdrawls in the wake of
Cyclone Winston in 2016. Motivated by this policy action, we provide a normative
analysis of the use of early pension withdrawals after disasters, by setting up a life-cycle
saving model with myopic households facing large natural disaster shocks. The model
demonstrates the key trade-off between building up sufficient retirement savings and
ensuring the access to savings against natural disaster shocks, and sheds light on welfare
implications of early pension withdrawals.
Ms. Patrizia Tumbarello, Ezequiel Cabezon, and Mr. Yiqun Wu
The small states of the Asia and Pacific region face unique challenges in raising their growth potential and living standards relative to other small states due to their small populations, geographical isolation and dispersion, narrow export and production bases, exposure to shocks, and heavy reliance on aid. Higher fixed government costs, low access to credit by the private sector, and capacity constraints are also key challenges. The econometric analysis confirms that the Pacific Island Countries (PICs) have underperformed relative to their peers over the last 20 years. Although these countries often face more limited policy tools, policies do matter and can further help build resilience and raise potential growth, as evidenced in the recent business cycle. The Asia and Pacific small states should continue rebuilding buffers and improve the composition of public spending in order to foster inclusive growth. Regional solutions should also continue to be pursued.