Over the past two years, economic activity in Palau has been slowed. Executive Directors welcomed the authorities’ disciplined policies, strong financial sector legislation, and prudent management of foreign grants. They encouraged the authorities to build a strong fiscal consolidation and improve the business environment. Directors applauded the authorities’ strong efforts to reduce expenditure. They stressed the need for strengthening tax administration and commended the well regulated financial sector, and encouraged the authorities to improve the coverage, reliability, and timeliness of key economic statistics.
International Monetary Fund. Asia and Pacific Dept
Palau is a middle-income micro state in the Pacific (population: 18,000) that relies heavily on tourism and grants, and is exposed to natural disasters. The economy grew strongly at 9.4 percent in FY2015 led by robust tourism and construction activity, but the surge in tourist arrivals strained infrastructure and was tilted to low budget tourism. The fiscal position has improved, but further efforts are needed to ensure long-term fiscal sustainability. The outlook is favorable although subject to significant downside risks. The discussions focused on
This 2001 Article IV Consultation highlights that the Republic of Palau faces a number of development challenges. Substantial improvements in human and physical infrastructure are needed to sustain higher growth rates. About 80 percent of the land area is on the Babeldaob Island, which is virtually inaccessible now, but it is expected to develop rapidly after the completion of a Japan-funded bridge in 2002 and a United States-funded island access road in 2004. Asset balances have been declining as a result of drawdowns to finance fiscal deficits, as well as recent investment losses.
The Republic of Palau is a small island economy, heavily dependent on tourism and external assistance. Economic growth has been modest in the last few years and inflation is low. The authorities launched a wide range of reform initiatives since 2001, but several important ones have stalled in the legislative process. Although the banking regulatory framework still needs improvements for effective implementation, a tax reform package, a new foreign investment law, a statistics law, and proposals related to streamlining the executive and legislative branch have not yet been enacted.
This 2005 Article IV Consultation highlights that Palau’s economic growth has picked up in recent years while inflation has been low. After several years of slow growth, real GDP grew by 5 percent in FY2004 and FY2005, driven by a steady increase in visitor arrivals with the start of new airline routes and hotels. Economic prospects in the near term remain upbeat but are uncertain in the longer term. Tourism will continue to be a main source of near-term growth while ongoing externally financed large infrastructure projects will support construction and other services.
This paper provides a review of recent economic developments in Palau, covering the first five years of the Compact of Free Association (Compact) with the United States. The paper analyzes the economic growth, prices, wages, and employment. The study assesses the public finances and overall developments, which include revenues and grants, expenditure, local governments, trust funds, and nonfinancial public enterprises. The paper provides a detailed study of the financial and external sectors, current and capital accounts, external debt, and exchange and trade systems.
This paper examines recent economic developments in the Republic of Palau. Palau has made a modest recovery in 2000 and 2001. Real GDP growth has been about 1 percent in 2000 and 2001, after the recession brought about by the Asian crisis reached its trough of negative 5½ percent growth in 1999. This recovery was mainly owing to grant-financed large infrastructure projects. However, the outlook on tourism, Palau’s major industry, remains weak owing to the events on September 11, and the expected El Nino, which also threaten the development of tourism-related private sector projects.