This paper focuses on overcoming the challenges of globalization. The paper highlights that globalization has the potential to make all individuals better off. However, there is no assurance that all individuals will be better off or that all changes will be positive. The studies that show that, on average, poverty declines with economic growth are encouraging. But averages hide the negative impact on individual countries and on certain groups. In addition, there are important questions about the relationships between economic policies and outcomes, especially the impact of macroeconomic and structural reform policies on poverty.
The work on the small states is an important component of the IMF’s global policy agenda. Among the 36 member countries covered by the IMF Asia and Pacific Department (APD), 13 countries are developing small states—most of which are Pacific islands. As part of APD’s ongoing effort to increase its engagement with regional small states and their development partners and enhance information sharing within the IMF, this issue marks the launch of the APD Small States Monitor, a quarterly bulletin featuring the latest economic developments, country notes from the most recent Article IV staff reports, special topics, past and upcoming events, and forthcoming IMF research on small states. In future issues, we will also host contributions from the authorities of small states and their development partners on key policy topics. Our goal is to exchange knowledge and deepen our understanding of the policy challenges these economies face to better tailor our policy advice.
Average growth in the small states in the Asia and Pacific region remained weak (1 percent) in 2013 and underperformed that in other small states—2 percent. However, activity within the Asia-Pacific small states was uneven, with commodity exporters growing at the rate of 3 percent which, while robust, was lower than past rates (Figure 1). Economic performance in the microstates (i.e., countries with a population below 200,000—Kiribati, the Marshall Islands, Micronesia, Palau, Samoa, Tonga, and Tuvalu) lagged behind with growth estimated at less than 1 percent. Inflation has remained broadly in check. These countries remain highly vulnerable to natural disasters as shown by the recent cyclones in Tonga and Vanuatu, and severe floods in Solomon Islands.
Context: The Republic of the Marshall Islands (RMI) is going through a period of output fluctuations. The economy expanded in FY2012 by 3.2 percent, supported by export growth, but in FY2013 is estimated to have slowed to 0.8 percent due to the postponement of infrastructure projects. A fiscal deficit of 0.8 percent of GDP was recorded in FY2012 and another deficit of similar magnitude is estimated for FY2013.
Recent economic developments of Tuvalu were discussed. Major construction projects to build a wharf and a power station have been completed, and seafarer employment—Tuvalu’s main foreign exchange earning source for the private sector—is weak. The Consolidated Investment Fund (CIF) available for budget financing will be depleted. Freezing wages and reducing travel costs will also be important. Improvements in the banking sector and credit culture will help to support private-sector development. Executive Directors agreed to ensure fiscal sustainability.
This paper discusses Tuvalu’s economic condition, internal happenings, external linkages, and climate. The country has reported slow economic growth after the global crisis. The export and economic expansions have been minimal with many of its goods imported. The main source of income for the country continue to be remittances from its citizens working abroad and donor assistance. The government has laid out a rigid agenda for improving fiscal strength, literacy rate, power, health, and reducing nonpriority expenditure. The authorities believe that these challenges have given a fighting spirit to the country.
Tuvalu is one of the smallest and most isolated countries in the world. With a population of some 11,000 people living on 26 square kilometers, Tuvalu is more than 3,000 kilometers away from its nearest major external market (New Zealand). The country faces tremendous challenges stemming from its remoteness, lack of scale economies, weak institutional capacity, and, above all, climate change and rising sea levels, which threaten the country’s very existence. (Appendix III)
Tuvalu is a fragile micro-state facing tremendous challenges from its remoteness, lack of scale economies, weak institutional capacity, and above all, climate change, which threatens the country's very existence. Thanks to buoyant fishing licensing fees and grants, Tuvalu has accumulated fiscal buffers in recent years, but it is now incurring significant costs rebuilding after the devastating Cyclone Pam in March 2015. Looking ahead, Tuvalu faces substantial long-run costs in improving its infrastructure to mitigate the effects of climate change.
Tuvalu is a fragile micro state. The country's remoteness, narrow production base, and weak banking sector constrain private sector activity.