18 Aug 2009

ADB warns of tough 2010 in Pacific

3:10 pm on 18 August 2009

The Asian Development Bank is warning Pacific Island governments to prepare for a tough 2010 despite the global economy starting to stabilise.

The Bank says if resource-rich countries such as Papua New Guinea are excluded, growth in the Pacific will contract by 0.4 percent this year.

An ADB economist, Craig Sugden, says given the dependence of many Pacific countries on remittances and tourism, they are likely to face a tough year in 2010 and it's best if governments can anticipate the weakening and adjust for lower revenues.

But he says it is important governments don't follow the path they have in the past and make across the board cuts in spending.

"These fall predominantly on goods and services and that flows to problems for service delivery. So a better way to tackle the situation would be to try and prioritise expenditure and make larger cuts in low priority areas and smaller cuts, or no cuts if possible, in the priority areas - priority areas being, for example, primary education or rural health services."

ADB economist, Craig Sugden