Recovery may take longer, says Zhang
14 July, 2021, 6:00 pm
International Monetary Fund deputy managing director Tao Zhang says that Fiji and other Pacific island countries that have depended on tourism may not recover from COVID-19 impacts before 2023.
In addressing the Forum Economic Ministers Meeting which started yesterday, Mr Zhang said Pacific island economies have been hit hard and the pandemic has imposed a severe social toll with rising unemployment and poverty.
“The pace of recoveries will hinge on vaccine supplies and distributions, external environment and domestic policy support,” he said.
“For commodity exporters such as Papua New Guinea and Solomon Islands, a return to positive growth is plausible this year as the external environment improves.
“For tourism-reliant countries including Fiji, Palau, Samoa, and Vanuatu, the recovery will take longer.
“Our best guess is that the region may now get back to 2019 tourism levels before 2023. “
Beyond the pandemic, Mr Zhang said Pacific islands faced severe daunting challenges because of certain factors including high public debt.
“Higher public debt has added to pre-pandemic vulnerabilities in several countries.
“This issue is all the more pressing, given the investment needed to enhance climate and natural disaster resilience and to address infrastructure deficiencies, and human capital development.
“Second, the losses of correspondent banking relationships in Correspondent Banking Relationships (CBRs) threaten remittances, business income and fiscal revenues.
“The decline in the number of the CBRs is a global phenomenon but is particularly problematic in the Pacific and reflect the assessment by banks of the risks relative to the profitability of this business.
“Third, Pacific islands are particularly exposed to the negative effects of climate change.
“They have less capacities to adapt to changing climate conditions, and the natural disasters that accompany such change.
“For some of the islands, climate change is a existential threat. Work on the economics of climate change and adaptations in the IMF has already increased substantially.”