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The World Bank is projecting regional growth to fall to 2.6 percent this year, down from 5.5 percent in 2023.
In a report of an economic update, it says that economic growth is slowing across the Pacific as countries face weak global growth, natural hazards, and climate-related shocks.
It says inflation is easing but remains above pre-pandemic levels, keeping the cost of living stubbornly high.
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Inflation is projected to fall to 3.6 percent in 2025, down from a peak of 7.4 percent in 2023, but elevated prices continue to strain household budgets.
Moreover, the region’s dependence on external aid, remittances, and imported goods may leave many economies vulnerable to shocks.
The World Bank adds that aggregate growth among tourism- and remittance-led countries such as Samoa, Tonga, Palau, and Vanuatu is expected to halve from 2024 to 2025.
In Solomon Islands, the second-largest economy among the 11 Pacific Island Countries covered in the update, growth has hovered around 2.5 percent, constrained by structural challenges including declining logging revenues and limited economic diversification.
Many Pacific economies remain highly exposed to natural disasters, climate shocks, and external funding volatility, with foreign government grants making up nearly 40 percent of gross national income in some countries.
It says amid these challenges, the report identifies a major opportunity to boost long-term resilience and growth: increasing women’s participation in the workforce.
On average, just 42.7 percent of working-age women are active in Pacific labor markets. This is more than 15 percentage points lower than male participation.
Closing this gap could raise long-run GDP per capita by over 20 percent on average across the region.
Senior Economist at the World Bank Ekaterine Vashakmadze says while Pacific nations can’t control global shocks, there is an opportunity to build stronger domestic foundations.
The economist says real economic resilience will come from addressing these long-standing challenges through structural reforms, adding that engaging more women in work is one of the highest-impact reforms Pacific governments can pursue.
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