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International Monetary Fund. Asia and Pacific Dept
Strong and timely containment measures have successfully prevented a domestic COVID-19 outbreak but have also weighed on economic activity. The real GDP is estimated to have contracted by 3.3 percent in FY2020 and is projected to further decline by another 1.5 percent in FY 2021 due to continued travel restrictions. Economic activity is expected to pick up in FY2022, as COVID-related restrictions will be relaxed gradually. The government is currently negotiating the renewal of Compact of Free Association (COFA) financial provisions with the United States, but terms remain uncertain. The government is considering to repeal the SOV Act and a bill on establishing a Digital Economic Zone was submitted to the Parliament recently.
International Monetary Fund. Asia and Pacific Dept

1. RMI faces several long-standing issues. RMI is a fragile state, located remotely in the Pacific. Its small and dispersed population with high migration rates to the U.S. constrain potential growth. RMI is very vulnerable to climate change because of its low elevation. Sizable budgetary grants under the Compact of Free Association Agreement (COFA) 1 between the Republic of Marshall Islands (RMI) and the United States (US) will expire in FY232, 3. The loss would be only partially compensated by disbursements from a Compact Trust Fund (CTF) set up for this purpose, and RMI could face substantial budget deficits (“fiscal cliff”) without offsetting policy measures. The US and RMI administrations are currently negotiating a new agreement, but the terms are uncertain.

International Monetary Fund. Asia and Pacific Dept

Strong and timely containment measures have successfully prevented a domestic COVID-19 outbreak but have also weighed on economic activity. The real GDP is estimated to have contracted by 3.3 percent in FY2020 and is projected to further decline by another 1.5 percent in FY 2021 due to continued travel restrictions. Economic activity is expected to pick up in FY2022, as COVID-related restrictions will be relaxed gradually. The government is currently negotiating the renewal of Compact of Free Association (COFA) financial provisions with the United States, but terms remain uncertain. The government is considering to repeal the SOV Act and a bill on establishing a Digital Economic Zone was submitted to the Parliament recently.

International Monetary Fund. Asia and Pacific Dept

Strong and timely containment measures have successfully prevented a domestic COVID-19 outbreak but have also weighed on economic activity. The real GDP is estimated to have contracted by 3.3 percent in FY2020 and is projected to further decline by another 1.5 percent in FY 2021 due to continued travel restrictions. Economic activity is expected to pick up in FY2022, as COVID-related restrictions will be relaxed gradually. The government is currently negotiating the renewal of Compact of Free Association (COFA) financial provisions with the United States, but terms remain uncertain. The government is considering to repeal the SOV Act and a bill on establishing a Digital Economic Zone was submitted to the Parliament recently.

International Monetary Fund. Asia and Pacific Dept

On behalf of the authorities in the Republic of Marshall Islands (RMI), we thank Ms. Zhou and her team for their constructive engagement and candid dialogue on the country’s economy and policies in unprecedented difficult circumstances.