Photo: AFP
US tariffs, among a variety of changing factors, will slow down economic growth in the Pacific, according to the International Monetary Fund (IMF), which downgraded its economic forecasts regionwide in April.
It expects real GDP growth, which measures the change in an economy's output, to fall from 3.6 percent in 2024 to 3.1 percent in 2025, and further to 2.7 percent in 2026, on average across the region.
That is a sharper drop between 2024 and 2025 than the IMF forecast in October last year, when it projected 3.3 percent in 2025.
IMF's Asia & Pacific Department deputy director Nada Choueiri told RNZ Pacific that the decline from last year to this year was sharper than expected, mostly because of trade tensions.
Some countries have are faring far worse than others. Samoa's growth will grind to a near halt, falling from 9.4 percent in 2024 to 5.4 percent in 2025, and then to 2.6 percent in 2026.
Fiji growth will fall from 3.7 percent to 2.6 percent from last year to this year, while the Solomon Islands' economy grows slightly from 2.5 percent to 2.7 percent.
"The US is a major destination for Fiji's goods exports, and Fiji is very dependent on tourism."
However, it is not all bad news - Papua New Guinea will see faster growth, from 3.7 percent last year to 4.6 percent this year, which the IMF attributes to an increase in gold production and prices.
Choueiri said that a slowdown in growth was expected, as nations adjusted during the post-Covid recovery period.
She said because of the Trump tariffs, the new economic landscape is subject to high uncertainty.
"There will be indirect effects on growth, via the tariff's negative impact on the economies of major trading partners, such as Australia, New Zealand, China, other Asian economies, and of course the US itself," she said.
"These indirect effects will be stronger for those economies in the region that depend on tourism and on remittances."
In terms of direct impacts, the IMF expects the influence of China and the broader Asian market in the region to grow as demand shrinks for Pacific exports in the US.
"China is a top-five export destination for many Pacific Island economies, such as Fiji, Micronesia, Nauru, PNG, Solomon Islands, and Vanuatu," she said.
"For example, China is one of the most important markets for Solomon Islands' timber exports, and a major source of tourism and foreign investment into Palau."
