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Ms. Shari Boyce, Mr. Sergei Dodzin, Ezequiel Cabezon, Mr. Fazurin Jamaludin, Mr. Yiqun Wu, and Ms. Rosanne Heller

Abstract

This issue of the Asia & Pacific Small States Monitor focuses on the challenges facing Asia and Pacific small states associated with natural disasters and climate change. Most tourism-oriented economies experienced a robust increase in arrivals, partly reflecting country-specific factors. Among commodity exporters (Bhutan, Solomon Islands, and Timor-Leste) and other Asia and Pacific small states, growth remains uneven: robust activity in Bhutan was driven mainly by hydropower-related construction activities; Solomon Islands experienced a continuing decline of logging stocks and a short-term disruption of gold production; and Timor-Leste’s ongoing depletion of oil reserves has led to a tighter budget constraint and lower government spending in the non-oil sector.

Ms. Shari Boyce, Mr. Sergei Dodzin, Ezequiel Cabezon, Mr. Fazurin Jamaludin, Mr. Yiqun Wu, and Ms. Rosanne Heller

Abstract

Context: Bhutan is a small, until recently fast-growing, lower middle-income country with deep economic ties to India and a peg to the Indian rupee. Growth in Bhutan was robust during the last Five-Year Plan (2008/09 to 2012/13), driven by the development of the hydropower sector (exporting electricity to India) and a credit-fueled private consumption boom.

International Monetary Fund. Communications Department
This issue focuses on recent experiences that holds lessons for when to tackle debt and when not to. Growth is picking up, and the IMF has been ratcheting up its forecasts. Government coffers are filling and, with more people at work, demand for public social support is receding. Research shows that the stimulatory effect of fiscal expansion is weak when the economy is close to capacity. Low-income economies may be at greatest risk. Traditionally, they borrowed from official creditors at below-market rates. Higher global rates could divert precious budget resources to debt servicing from crucial infrastructure projects and social services. Raising budget balances toward their medium-term targets can be achieved at little cost to economic activity. Growth-enhancing infrastructure investments and crucial social services such as health and education should be maintained. Well-designed fiscal policy can address inequality and stimulate growth.
International Monetary Fund

This 2011 Article IV Consultation reports that Fiji’s economic outlook appears stable, but there are downside risks related to the political situation, structural weaknesses, and the global environment. The 2012 budget has proposed much-needed fiscal consolidation, though marginal income tax rate reductions will make it difficult to achieve deficit targets. Monetary policy is accommodative, given the currently benign inflation outlook, but continued vigilance against future inflationary pressure is critical, and credit growth targets should be avoided.

International Monetary Fund
This Selected Issues paper focuses on the insolvency of the National Bank of Fiji (NBF). As of June 1995, an estimated two-thirds of its loan portfolio was judged to be nonperforming (7½ percent of GDP), with slim chances of recovery, leaving the bank with a negative net worth estimated at F$170 million. The Reserve Bank of Fiji (RBF) raised concerns about the NBF’s lending practices as early as 1991, but it lacked the power to enforce a solution. The problems continued to grow until the NBF’s liquidity position finally became untenable in 1994.
International Monetary Fund
Fiji’s economy has contracted by 3 percent in 2009, and marginal growth is estimated for 2010. Foreign exchange reserves have improved steadily following the April 2009 devaluation and stood at over 4 months of imports (US$710 million) at end 2010. Fiji’s economic growth was low in the past few years and the structure of the economy remained broadly unchanged. The weak business climate results in sluggish private investment and is the major impediment to economic growth in Fiji. Fiji’s economy––especially tourism and finance––is linked closely to its regional neighbors.
International Monetary Fund
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
International Monetary Fund
This paper reviews economic developments in Fiji during 1990–95. The reorientation of policies, although incomplete, led to stronger growth of nontraditional exports and non-sugar manufacturing, and to a pickup in GDP growth to an average of 4.1 percent between 1988 and 1993. Fiscal deficits declined in the early 1990s, although often larger than budgeted, and the external current account progressively turned into a surplus position. Despite the actions undertaken, however, private investment did not recover from its slump in the late 1980s impeding the economy from fully exploiting its growth potential.
International Monetary Fund. Asia and Pacific Dept
This 2013 Article IV Consultation highlights that growth in the Fijian economy increased to 2¼ percent in 2012, supported by income tax cuts, low interest rates, and the one-time payouts under the Fiji National Provident Fund (FNPF) reform, which offset the negative impact of the severe floods and Cyclone Evan on the agriculture and tourist sectors. Inflation declined as imported commodity and food prices moderated. With a lower-than-budgeted deficit of 1 percent of GDP, Fiji’s debt-to-GDP ratio continued to decline in 2012. The latest available indicators suggest accelerating growth momentum in the first half of 2013 boosted by increases in disposable income, bank borrowing, and rising investment.