Analysts have been slow to notice Vanuatu’s economic turn around. Most economists writing on Vanuatu credit it for having achieved macroeconomic stability, but note its poor long-term growth performance, which is little different from its annual population growth of about 2.5%.2 It has been little noticed that growth in Vanuatu has accelerated in recent years. The economy grew at an annual average rate of 6.6% between 2003 and 2008.
Key messages from PiPP’s tenth Discussion Paper:
- Analysts have been slow to notice Vanuatu’s economic turn around.
- Vanuatu’s growth acceleration is important for the Pacific.
- Tourism and construction have been major drivers of growth in Vanuatu.
- Macroeconomic stability has been important for growth, but is far from the only factor.
- Vanuatu’s recent growth has been led by the private sector, not by aid.
- Vanuatu’s upsurge in tourism and construction would not have been possible without an active land market.
- Vanuatu has also benefited from deregulation.
- Social stability underlies Vanuatu’s recent success.
- Recently-gained access to foreign labour markets boosts Vanuatu’s growth prospects.
- Due to the global recession, short-term growth prospects are uncertain. But so far in 2009, tourism growth has accelerated not declined.
- Vanuatu’s future is not assured. Small island economies are volatile and easily destabilised. But Vanuatu has gone much further than achieving macroeconomic stability, and has good prospects for long- term growth.