The Pacific Islands, long seen as a diverse and dynamic region full of promise, face a troubling economic outlook in 2024. The World Bank’s latest report highlights a sharp slowdown in growth, projecting a regional GDP increase of only 3.6% this year, down from a stronger 5.8% rebound in 2023. The deceleration is primarily driven by a significant slowdown in Fiji, which accounts for nearly half of the region’s economic output.
The fading post-pandemic recovery, combined with mounting structural challenges, weaker investment, and increasing vulnerability to climate-related disasters, underpins the region’s economic deceleration. The World Bank has urged immediate action to address these underlying issues, warning that without swift and sustained investment, the Pacific Island nations could face long-term economic stagnation, with serious implications for poverty reduction and sustainable development.
In 2023, the Pacific Islands experienced a robust recovery from the pandemic, largely fueled by the resumption of tourism and international travel. Countries like Fiji, Vanuatu, and others reliant on foreign visitors benefited from a surge in demand as tourists from key markets like Australia and New Zealand returned in large numbers. However, this momentum has proven to be short-lived.
The World Bank’s latest projections suggest Fiji’s growth will decline sharply to just 3% in 2024, down from stronger post-pandemic rebounds seen in 2022 and 2023. This slowdown in Fiji, which represents nearly 50% of the Pacific Islands’ combined output, is expected to weigh heavily on the entire region’s economic performance.
A major contributing factor to Fiji’s slower growth is its high level of public debt. At 79% of GDP in 2024, Fiji’s debt remains alarmingly high, standing one-third higher than pre-pandemic levels. This limits the government’s ability to invest in critical infrastructure, social services, and economic diversification.
Furthermore, the spillover effects of Fiji’s economic challenges could exacerbate problems in other Pacific nations, many of which rely heavily on regional trade, tourism, and remittances.
The World Bank report paints a grim picture of declining investment across the Pacific Islands, particularly highlighting that investment has shrunk in seven of the past 15 years. In a “troubling outlook,” the report projects that investment growth across 11 Pacific Island nations is expected to average just 1% annually this decade, a sharp decline from the 4.2% annual average between 2000 and 2019.
“Without immediate and concerted efforts to ramp up investment, Pacific Island nations may struggle to reduce poverty and generate new economic opportunities,” the World Bank warned in its assessment. Weaker investment is seen as a key factor preventing the region from achieving long-term sustainable growth.
This slowdown in investment can be attributed to several interrelated factors. First, the relatively small size of many Pacific economies limits their ability to attract large-scale foreign direct investment. Second, high transportation and communication costs, coupled with geographical isolation, make it difficult for businesses to operate efficiently across these island nations. And third, frequent natural disasters—such as cyclones, floods, and droughts—create economic uncertainty and often force governments into cycles of “construction, destruction, and repair,” further draining financial resources.
The Pacific Islands are particularly vulnerable to climate change, with natural disasters costing an average of 1.5% of the region’s gross domestic product (GDP) each year, according to the World Bank. Countries like Fiji, Vanuatu, and Tonga frequently face cyclones and other extreme weather events that devastate infrastructure, displace communities, and set back development gains.
The report highlights the challenges these nations face in managing economic shocks caused by such disasters. Many Pacific Island countries are locked into a vicious cycle of rebuilding only to see their efforts destroyed by the next cyclone or flood. This cycle not only delays economic progress but also limits the resources available for critical development projects in areas like education, healthcare, and infrastructure.
For countries like Vanuatu, the consequences of these disasters are particularly acute. In addition to facing devastating cyclones, Vanuatu’s economy has been hit hard by the liquidation of its national airline, Air Vanuatu, which had long been a key driver of tourism and economic activity. As a result, Vanuatu’s growth is projected to slow to a mere 0.9% in 2024. This economic shock is compounded by a decade-long trend of shrinking investment, which has left the country’s infrastructure and tourism sector vulnerable to external shocks.
While smaller Pacific Island countries have seen a modest recovery in tourism, the overall outlook for the sector remains mixed. Tourism, which is one of the mainstays of the Pacific economies, showed signs of life as travel restrictions lifted and tourists from Australia and New Zealand began to return to island resorts, beaches, and cultural landmarks.
However, this resurgence in tourism is expected to taper off as the post-pandemic euphoria fades. Fiji, in particular, which heavily relies on international tourism, faces new challenges in maintaining its momentum amid weakening global demand and the challenges of high public debt.
The World Bank’s report emphasizes the importance of investing in sustainable tourism, which could offer a more resilient path forward for Pacific Island economies. This includes ensuring that tourism infrastructure is built to withstand climate-related risks, while also diversifying the range of services offered to attract a broader and more sustainable tourist base.
The report highlights that beyond tourism, Pacific Island countries must prioritize investments in critical infrastructure, particularly in ports, inter-island shipping, and digital connectivity. The geographical isolation of the Pacific Islands means that efficient and reliable transport infrastructure is essential for economic integration, trade, and connectivity between islands.
One of the most glaring challenges facing the region is its poor digital connectivity. The cost of internet access remains prohibitively high, and connection speeds lag significantly behind global standards. This creates a digital divide that limits the ability of businesses, governments, and individuals to participate in the global economy.
“Digital connectivity really has to be addressed,” said World Bank senior economist Dana Vorisek during a media briefing in Suva. Improved digital infrastructure is seen as critical not only for business and trade but also for enhancing access to education, healthcare, and social services in remote and isolated communities.
Additionally, the World Bank highlighted the need for reforms in payment systems and the expansion of digital payment services. This would improve the efficiency and impact of remittances, which are a crucial source of income for many families across the Pacific. Many Pacific Islanders work abroad, sending money back home to support their relatives. However, high fees and inefficient payment channels reduce the overall impact of these remittances.
The World Bank report underscores the untapped potential of the Pacific Islands’ maritime resources. Despite having some of the largest maritime zones in the world, the region has not yet fully capitalized on opportunities in sustainable fishing, aquaculture, and marine biotechnology.
Sustainable fishing and marine industries offer significant economic potential, especially given the increasing global demand for seafood and other marine products. Investments in these sectors could generate much-needed revenue for Pacific Island countries while also promoting sustainable practices that protect the region’s rich biodiversity.
However, realizing the potential of the “blue economy” requires coordinated regional efforts, investment in modern fishing fleets and processing facilities, and better governance of marine resources to prevent overfishing and ensure long-term sustainability.
The World Bank’s report offers a clear message: the Pacific Islands face significant challenges, but there is also tremendous potential for growth and development if the right investments are made. To unlock this potential, Pacific Island nations must prioritize investment in key areas such as infrastructure, digital connectivity, sustainable tourism, and the blue economy.
Addressing these structural challenges will require not only domestic reforms but also greater regional cooperation and international support. Pacific Island nations are already working together through organizations like the Pacific Islands Forum to address common challenges, but more needs to be done to ensure that the region can overcome its unique vulnerabilities.
Moreover, with the increasing threat of climate change and natural disasters, Pacific Island countries must also invest in resilience-building measures to protect their economies and communities. This includes building more robust infrastructure, improving disaster preparedness, and securing access to international climate financing.
The economic outlook for the Pacific Islands in 2024 is marked by uncertainty and significant challenges. The post-pandemic rebound is fading, investment is slowing, and climate risks are ever-present. Fiji’s economic deceleration, high public debt, and weaker growth across the region underscore the urgent need for action.
