Softening and increasingly volatile global economic conditions are expected to have only a moderate downward impact on sub-Saharan Africa this year and next. Growth is projected to remain robust at about 5 percent in 2013 and 6 percent in 2014, backed by continuing investment in infrastructure and productive capacity. This outlook is not as strong as portrayed in the May 2013 edition of this publication,1 reflecting, in part, a more adverse external environment—characterized by rising financing costs, less dynamic emerging market economies, and less favorable commodity prices—as well as diverse domestic factors. However, the magnitude of the revisions is modest (–0.7 percent of GDP on average in 2013 and −0.1 percent in 2014).
The Republic of the Marshall Islands (RMI) consists of a group of atolls and islands in the central Pacific with a total land area of 20,000 square kilometers and 750,000 square miles of ocean. Two-thirds of the population of about 58,000 live in the two major urban centers, Majuro and Ebeye. Like other small Pacific island countries, the country is remote from major markets, and the economy is highly dependent on U.S. financing provided through the amended Compact of Free Association (covering 2004-23). Economic activity is dominated by the public sector, and a small private sector developed mainly to meet the demands of the government and its workers. Small contributions also come from agriculture, fisheries, and tourism. As a result of large external assistance, economic conditions are relatively favorable by regional standards, with a per capita GDP of around $2,500.
The Federated States of Micronesia (FSM) comprises about 600 islands, stretching 1,800 miles across the central Pacific. The total landmass of about 700,000 square kilometers is spread over a sea area of 1 million square miles, including its exclusive economic zone. With the remote location, small population of 110,000, and narrow resource base, Micronesia has much in common with other Pacific island countries. Economic and social conditions are relatively favorable by regional standards, with per capita GDP of around $2,000, primarily because of very high external grants under the two successive Compacts of Free Association with the United States (Box 11.1). At the same time, there is a need for major adjustment efforts because external assistance will be reduced in coming years.
The Republic of Palau is an archipelago of more than 560 islands. It has a total land area of 460 square kilometers stretching along 700 kilometers of sea from northeast to southwest. The center of government and economic activity is the northern volcanic island of Koror, which is connected by bridge to Babeldaob, a densely vegetated island that accounts for 78 percent of total land area but remains largely undeveloped. The capital is to move from Koror to Babeldaob. South of Koror and scattered over a large lagoon are the 300-odd raised coral limestone Rock Islands, mostly uninhabited, and world-renowned for marine-based tourism. The southernmost islands of Peleliu and Angaur were the site of fierce battles during the Second World War. Palau was administered by the United States after the war and until 1990 as part of the United Nations Trust Territory of the Pacific Islands. Palau adopted its own constitution in 1981 after choosing not to join the Federated States of Micronesia in 1978. A Compact of Free Association with the United States was approved in 1986 but ratified only in 1993, following several referenda on whether the United States should be permitted to transport nuclear weapons through Palau’s territory. Under the Compact, the United States controls Palau’s security and defense for 50 years and has exclusive access to waterways and certain land, in exchange for economic aid, security, and right of entry for Palauans to the United States for residence or work (Box 12.1).
Samoa consists of nine islands in the South Pacific, the two largest of which are Upolu, where the capital, Apia, is located, and Savai’i, which has a total land area of 2.8 square kilometers. Samoa has a narrowly based economy and, like many of the Pacific island countries, is highly vulnerable to weather-related shocks. It is heavily dependent on private remittances, which are equivalent to about 25 percent of GDP, to finance consumption and on official transfers to finance investment. Expatriates tend to maintain very strong ties with their families, villages, and churches, and this is true even among second-generation migrants. Emigration, which is primarily to Australia, New Zealand, and the United States, has kept the population stable at roughly 180,000 over the past decade. The political system is based on a parliamentary system of democracy and is stable.