1. Vanuatu economic outlook
February 2019
Vanuatu economic outlook
Kishti Sen
International Pacific Economist
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@kishtisen
@ANZ_Research
This is not personal advice. It does not consider your objectives or circumstances. Please refer to the Important Notice.

2. Topics Discussion topics Current state of play and outlook
Opportunities and risks
Australia’s step up: regional implications
Some concluding remarks 1 2 3 4

3. Current state of play and outlook

4. Tourism, agriculture and construction key growth drivers
Real GDP, annual per cent change
Source:

5. Construction a key driver of recent growth …
GDP by industry
Source:

6. Construction contribution to growth
… more to come
Construction contribution to growth
Source:

7. Crop production contribution to growth
Agriculture chimed in
Crop production contribution to growth
Source:

8. Economic expansion to continue
Vanuatu’s economy is largely dependent on visitor arrivals
Prone to cycles in global economic conditions
Visitor arrivals will hold, global conditions not tanking, Australia still growing despite negative sentiment
Decline in the Australian dollar has made it tough
However, forward bookings are improving
Agriculture (crop production) mainly copra has contributed although the base is broadening (kava, coffee and cocoa)
Construction cycle close to peaking
Remittances from Pacific labour scheme strong helping underwrite demand
We expect growth to be in the 3 to 4 per cent range over the next two years
Outlook summary

9. Medium term outlook more promising
Tourism infrastructure and capacity investment to drive the next cycle of work
Traditional growth drivers yet to reach potential
Pacific gets a very small proportion of visitors to the region and Vanuatu gets even less.
With natural beauty and unique cultural experience, upside is huge
Infrastructure needs upgrade and more investment
We welcome Vanuatu Tourism Office’s initiative for a marketing plan to 2030
Tourism demand picks up, investment will pick up and become a key driver of growth
Harness potential in agriculture: not only overseas demand but also domestic market in particular the tourism industry
Agriculture needs a coordinated approach – fertile land and abundant opportunities across the sector. Options for downstream processing in Vanuatu.
A strategy document to maximise the benefits of this sector necessary
Agriculture will also deliver a broader based economy and opportunities for Ni-Vanuatu in rural areas

10. Global tourism has picked up
International tourist arrivals, world
Source:

11. Pacific getting a tiny proportion of visitors
International tourist arrivals
Source:

12. Australia’s step-up: what does it mean for the region?

13. The New Pacific strategy
Pacific has become the new ‘best friend’
Pacific ‘front and centre’ of Australia’s foreign policy
No more just donor-recipient relationship
No longer looking at the region through the security and stability lens – good governance and strengthening institutions was a priority. Still important.
Serious about bringing prosperity to the region
Providing options to fund infrastructure gap
Programs to enhance productivity in the agriculture sector
Step-up in soft aid as well to bring diplomatic relations closer
Ongoing support in mentoring good governance practices and helping build stronger institutional capacity
Overall, a very positive step
The New Pacific strategy

14. Some concluding remarks

15. Bringing it all together
Faster pace of growth to create more employment
Vanuatu is still a relatively young and developing country
Economic growth of 3 to 4 per cent not good enough
Aim higher to give more people an opportunity to work. We’ve hit high 6’s to 7 per cent before.
Achievable given huge potential of traditional growth drivers.
China became richer by becoming a workshop to the rest of the world.
Vanuatu can harness the potential in its natural beauty.
Focus on your comparative advantage – tourism and agriculture.
Era of being inward looking and finding state based solutions to problems is behind us.
Private sector can provide solutions and contribute to economic progress. Yes, we can go a lot higher!
Let’s work together to make Vanuatu an even better place to live and work.
Bringing it all together

16. Thank you