Half Year Economic&Fiscal Update
The Vanuatu economy grow by 2.3 per cent in 2014,in line with projection of 2.3 per cent projected at Budget. The growth largely reflects picking up activity in the industry and service sectors combined with the postponed implementation of new public infrastructure projects funded through grants and aid inkind, together with the usual recovery in private sector investments. For 2015, the domestic economy is forecasted to grow by 2.4 per cent.
For the second half of 2013, the global recovery is now projected to remain soft owing to weaker domestic demand and slower growth across major key emerging market economies and unexpected delay in growth recovery in the euro area. The impacts of the protracted growth of the euro area have affected confidence; with spillover effect to real domestic demand leading the downfall in major non-fuel commodity prices. Combined with improved supply conditions as a result new cheaper methodologies used to extract fuel from sources, the price of crude oil is now expected to fall by 2.3 per cent to level at US$102.6 per barrel.
The global inflation is projected to ease as demand softens and commodity prices recede. Overall, the end of period consumer prices –proxy of inflation is expected to slip by 0.3 percentage points to about 3.7 per cent in the last quarter of 2013 from 3.9 per cent in the 2012.
Conditional data for the first half of the year suggests that economic activity was recovering with VAT netting in more receipts over the first six months of 2013 compared to what attained in 2012 and the highest so far comparing to previous years. However, import duties have gone down which reflects WTO related legislation changes. The domestic average inflation rate measured by the average consumer price index (CPI) for the year to March 2013 recorded a decrease of 1.4 per cent; this represent an annual increase of 0.7 percentage point compared to the same period in 2012 with 2.1 per cent.