Pacific Economic Update, February 2023
This publication is the inaugural edition of the future publication series on Pacific Economic Update (PEU). It consists of two parts. Part A analyzes the recent economic developments in Pacific Islands. Based on these developments, the PI EU summarizes the outlook for the region’s economies and risks to this outlook. Second, the PEU provides an in-depth examination of a public debt issues in the Pacific and proposes policy recommendations to address public debt related challenges. The PEU is intended for a broad set of audience, including regional forums, policy makers, business leaders, international donors and the community of analysts and professionals engaged in the economies of Pacific Island countries. In dealing with the challenges of rising inflation, tepid recovery from the pandemic and global slowdown, the PICs should strike a balance between supporting livelihoods and reducing future public debt risks. The need for fiscal support during the current environment of high inflation and tepid economic recovery is understandable as it provides the much needed relief for vulnerable households and businesses to navigate the crisis. Nonetheless, these support measures create significant fiscal burdens, and are unsustainable, particularly if the high energy and food prices persist longer than envisaged. Most PICs already face low capacity to finance unexpected shocks which would be further tested by a natural disaster event. Therefore, PICs should tread a delicate balance between fiscal support measures and achieving fiscal sustainability. Any forthcoming fiscal support should be well-targeted, time-bound, and deficit-neutral. Over the medium-term, fiscal efficiency gains and ongoing donor support is critical to finance key development challenges and climate adaptation. Revenue-based fiscal consolidation measures could include improving the efficiency of tax collections and eliminating tax exemptions. On the expenditure side, PICs have limited room to sharply cut spending given the expected modest growth and ongoing development needs. Therefore, it becomes imperative to improve the efficiency of public spending, to maximize social dividends for every dollar spent. Resulting savings from fiscal consolidation measures could help build sovereign wealth funds to provide added fiscal buffers during shocks and economic downturns. Due to high vulnerability to disasters and climate change, PICs will need to seek ongoing concessional financing for critical climate adaptation and development needs.
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| Format: | Report biblioteca |
| Language: | English en_US |
| Published: |
Washington DC
2023-03-14
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| Subjects: | COVID-19, POST-PANDEMIC, TOURISM, TRAVEL-DEPENDENT, PUBLIC DEBT, |
| Online Access: | http://documents.worldbank.org/curated/en/099040503062337883/P17932202d1bec06d0a1360145996797693 https://openknowledge.worldbank.org/handle/10986/39523 |
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| Summary: | This publication is the inaugural
edition of the future publication series on Pacific Economic
Update (PEU). It consists of two parts. Part A analyzes the
recent economic developments in Pacific Islands. Based on
these developments, the PI EU summarizes the outlook for the
region’s economies and risks to this outlook. Second, the
PEU provides an in-depth examination of a public debt issues
in the Pacific and proposes policy recommendations to
address public debt related challenges. The PEU is intended
for a broad set of audience, including regional forums,
policy makers, business leaders, international donors and
the community of analysts and professionals engaged in the
economies of Pacific Island countries. In dealing with the
challenges of rising inflation, tepid recovery from the
pandemic and global slowdown, the PICs should strike a
balance between supporting livelihoods and reducing future
public debt risks. The need for fiscal support during the
current environment of high inflation and tepid economic
recovery is understandable as it provides the much needed
relief for vulnerable households and businesses to navigate
the crisis. Nonetheless, these support measures create
significant fiscal burdens, and are unsustainable,
particularly if the high energy and food prices persist
longer than envisaged. Most PICs already face low capacity
to finance unexpected shocks which would be further tested
by a natural disaster event. Therefore, PICs should tread a
delicate balance between fiscal support measures and
achieving fiscal sustainability. Any forthcoming fiscal
support should be well-targeted, time-bound, and
deficit-neutral. Over the medium-term, fiscal efficiency
gains and ongoing donor support is critical to finance key
development challenges and climate adaptation. Revenue-based
fiscal consolidation measures could include improving the
efficiency of tax collections and eliminating tax
exemptions. On the expenditure side, PICs have limited room
to sharply cut spending given the expected modest growth and
ongoing development needs. Therefore, it becomes imperative
to improve the efficiency of public spending, to maximize
social dividends for every dollar spent. Resulting savings
from fiscal consolidation measures could help build
sovereign wealth funds to provide added fiscal buffers
during shocks and economic downturns. Due to high
vulnerability to disasters and climate change, PICs will
need to seek ongoing concessional financing for critical
climate adaptation and development needs. |
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