The Coronavirus of 2019 (COVID-19) pandemic which has been impacting the global economy, compounded with TC Harold which struck the country on the 11th of April 2020 have resulted in Gross Domestic Product (GDP) growth forecasts needing to be revised significantly downwards from 3.4 per cent projected in the third quarter of 2019 to only 0.6 per cent in the Macroeconomic Committee’s (MEC) second quarter meeting of 2020. Survey results conducted by the Department of Finance and Treasury in collaboration with the Reserve Bank of Vanuatu and the Vanuatu National Statistics Office show that both disasters have inflicted considerable damage on all sectors of the economy. In the absence of Government response to these disasters, it is estimated that the economy would decline by 1.4 per cent in total. Nevertheless, the Government has been proactive in its policy decisions in devising and implementing practical policy measures to contain the impact of COVID-19.
Such include the Employment Stabilisation Payment (ESP) and TC Harold relieve through cyclone emergency fund which in all total to VT 5 billion. The Agricultural Sector has been severely affected this year projected to contract by 12.8 per cent while the Services Sector is projected to decline by just 0.3 per cent. The Industrial Sector is expected to offset the forecasted negative growth trends in the above-mentioned sectors. The encouraging 23.5 per cent forecasted for 2020 reflects the planned TC Harold reconstruction efforts as well as the implementation of ongoing infrastructural projects. A speedy recovery is nonetheless expected over the medium term driven by disaster recovery programs as well as government policy shifts towards a sustainable economic condition over the long run. One major caveat to the projections is that the COVID-19 pandemic timeframe is at present unknown, which brings about implicit risks in the Government’s response plans in terms of the availability of fiscal resources. It is crucial that response plans by the Government and its development partners be implemented on time and that resources allocated under the relevant policies are efficiently used to ensure the sustainability of the economy in these time of economic hardship.
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