PACIFIC governments should accelerate public sector and state-owned enterprises reforms to take the pressure off on national budgets, the Asian Development Bank Asian Development Outlook 2012 said.
"Sound fiscal management will become more important as the region's growth moderates, in order to create room to respond to future economic shocks," the report said.
The report said this capacity had been eroded in many Pacific Island countries and debt levels were already above target ceilings in Fiji, Nauru, Samoa, and Tonga. Kiribati, it added, had been drawing down its trust fund at an unsustainable rate and Tuvalu could not rely on its trust fund earnings in the foreseeable future.
On growth, the report said Vanuatu was on track to achieve a decade of uninterrupted growth.
"The regional slowdown in growth is being driven by a tapering off in the high growth rates in the large resource exporting economies of Papua New Guinea and Solomon Islands. Growth in PNG is expected to slow from 8.9 per cent in 2011 and 7.5 per cent in 2012, while Solomon Islands' growth is projected to decelerate from 9.3 per cent to 6 per cent. This is because of declining resource export revenues and, in the case of PNG, the winding down of construction activity on a key liquefied natural gas project.
"Resource-rich Timor-Leste, however, is expected to sustain growth of 10 per cent through 2012, supported by an increase in government expenditure, although growth is projected to soften to 8 per cent in 2013. Tourism-reliant economies such as Cook Islands, Samoa and Tonga are also forecast to experience accelerated growth through 2012, before seeing this slow in 2013.
"After experiencing its ninth consecutive year of expansion in 2011, Vanuatu is going against the moderating trend, with ADB forecasting acceleration of growth to 4.5 per cent in 2012 and 5 per cent in 2013. Government efforts to put in place a sound environment for the private sector are showing clear dividends," the report said.