Vanuatu’s economy is projected to slowly pick up from the first quarter of this year with GDP growth projected at 4.0 per cent in 2021 and 4.5 per cent in 2022. These projections were lowered by 1.0 percentage points and 0.2 percentage points respectively from the previous forecast. Growth in 2019 and 2020 are estimated at 3.9 per cent and -2.9 per cent respectively, with the 2020 growth being an improved revision from the -4.1 per cent projected in the previous forecast. The downward revision for 2021 reflects the prolonged closure of international borders to tourists, the slow implementation of Tropical Cyclone (TC) Harold recovery plans, delayed infrastructure projects, and weak domestic economic activities in-country. Growth in 2021 will nonetheless be driven by expansionary fiscal policies, loan repayment holidays being extended to mid-2021, the implementation of the 11th EDF (European Development Fund), and the export of certain commodities.
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One year into the COVID-19 pandemic, the second and third waves of the pandemic continue to cast uncertainty over the global economic forecast. While the International Monetary Fund’s (IMF) April 2021 World Economic Outlook (WEO) reported a much stronger forecast for 2021 and 2022 (6.0 per cent and 4.4 per cent) than the pre-pandemic forecasts – on account of the trade tensions between the United States and China – the dual health and economic nature of the pandemic makes it particularly difficult to form and hold assumptions with confidence. The higher forecasts are a product of the additional fiscal support in a few large economies, the anticipated vaccine-powered recovery over the second half of 2021, and continued adaptation of economic activity to subdued mobility. After one year of loss of lives and livelihood, global economic growth is projected at 6.0 per cent in 2021 and 4.4 per cent in 2022.