International trade is vital for economic prosperity in Pacific island countries, but their trade performance has been weak over the past decade with the exception of resource-rich countries. Small country size and remoteness from global economic centers may have contributed to this relatively poor performance. However, the emergence of Asia as a global economic center presents Pacific island countries with an unprecedented opportunity to develop trade with Asia, particularly in tourism for a number of PICs. Moreover, if a strong two-way linkage is established between tourism and agriculture, Pacific island countries stands a better chance to improve broad-based growth.

No abstract

This study aims to test within a relatively homogeneous group of small states what differentiates the growth performance of Pacific island countries (PICs) from their peers. We find that PICs are disadvantaged by distance and hampered by lower investment and exports compared with other small island states, but greater political stability, catch-up effects from lower initial incomes, and slower population growth have helped offset some of these disadvantages. On balance, policy-related factors, together with geography-related disadvantages, have led to growth rates in PICs that are much lower than in other small states. We also examine how real exchange rate appreciation, unfavorable developments in the external trade environment, and rising international transport costs may have contributed to PICs' slower growth over the past decade.

No abstract

No abstract