Surviving the global recession: strengthening economic growth and resilience in the Pacific

A joint report undertaken as an initiative by Australian Prime Minister Kevin Rudd and New Zealand Prime Minister John Key

Pearl farm in Manihiki's lagoon Cook Islands.

A joint report undertaken as an initiative by Australian Prime Minister Kevin Rudd and New Zealand Prime Minister John Key, Surviving the global recession: strengthening economic growth and resilience in the Pacific (PDF 3.5mb) finds that the Pacific Island countries have been hit hard by the global recession. The report outlines the impacts of the global recession on the Pacific and sets out a four-point action plan for an effective regional response to the global recession.

This joint ANZ report Surviving the global recession: strengthening economic growth and resilience in the Pacific, highlights that Pacific Island countries are experiencing lower growth, a worsening macroeconomic outlook and increased poverty. This report is one of two reports prepared for the Pacific Island Forum Leaders Meeting in Cairns. The second report — Tracking development and governance in the Pacific, 2009 — complements this report, by focussing on the Millennium Development Goals (MDGs) and development coordination.

The impact of the global recession in the Pacific has been mainly felt through lower prices and demand for commodities, pressure on tourism and falls in remittance flows and in the value of offshore national trust funds.

The report highlights that the global recession has exposed a range of underlying structural weaknesses in many Pacific Island countries which have exacerbated the impact of the recession and constrained countries' ability to respond. A number of countries were already stressed as a result of the high food and fuel prices of 2008 with high inflation, falling foreign reserves and unsustainable budget deficits.

As well, the report shows that economic growth, and growth per capita in the Pacific has been generally low, or negative, and people in a number of countries are now worse off than over a decade ago. The report shows that without substantive improvements in broad based and inclusive growth, countries will have limited capacity to strengthen progress against the MDGs.

The report highlights that the main challenge for countries in responding to the global recession is to:

Adjust to reduced revenues and offshore income in a way that safeguards macroeconomic stability whilst protecting funding for core services, and targeted support for the most vulnerable; and
At the same time continue fiscal and other reforms to improve competitiveness, to build more resilient broad-based economic growth.

The report sets out a four pillar framework for response:

i. the immediate priority of safeguarding macroeconomic stability, principally through fiscal adjustment

ii. strengthening budgetary management, protecting core services and targeted programs to assist the vulnerable

iii. continuing reforms to improve competitiveness and underpin longer term growth and development;

iv. using country policy responses as the framework for coordinated development assistance from development partners

Drawing on the experience of Vanuatu , the report shows that over the last five years with appropriate reform, sound economic management, and political stability, significant improvements in economic growth can be achieved, and this can then help support the resilience to respond to economic shocks, and support the people's ongoing development.

The report suggests that by implementing those reforms already highlighted by the Forum Economic Ministers and in the Pacific Plan , countries can achieve levels of growth well in excess of those of the last decade. Used well this ‘growth dividend' will put countries in a good position to weather future crises, gain from future global growth and make a dramatic difference to the achievement of the MDGs.