Kiribati’s economic fundamentals have strengthened in recent years with strong fishing revenue improving fiscal position, strengthening the current account and boosting business confidence.
This was part of the preliminary findings released by the International Monetary Fund (IMF) team that concluded their 2017 Article IV consultation with the island republic earlier this month.
The IMF noted that real GDP growth in Kiribati declined to 1.1 per cent in 2016 after registering a double-digit rate in 2015, Fiji Times reports.
But it is projected to pick up to about 3 per cent this year driven by construction and wholesale and retail trade.
While inflation has remained subdued in line with the prices of imported goods, Kiribati’s fishing revenue is also projected to remain robust over the medium term with economic prospects broadly favourable.
“The authorities have made commendable progress in structural reforms. They have implemented important reforms to improve the governance and management of the Revenue Equalization Reserve Fund (RERF) and replenished the fund from the cash reserves,” the IMF said in a statement.
“Concrete steps have been taken to address the funding gap of the Kiribati Provident Fund (KPF), improve connectivity and transportation services, and enhance access to global climate change financing. Kiribati’s participation in overseas labour mobility schemes also increased, albeit from a low base.
“Despite a favourable economic outlook, risks to near-term growth are substantial and skewed to the downside. A change of the climate cycle could imply large uncertainties for fishing revenue.
“Potential global financial market turmoil can feed into the domestic economy through the exposure of the Revenue Equalization Reserve Fund (RERF) and the KPF, the country’s two major savings vehicles.”
Given Kiribati’s high reliance on imported goods, the IMF stated that commodity price shocks and exchange rate volatility could swing imports in ways hard to accommodate.