Reporting issues. Providers of development co-operation beyond the DAC.
Small States Economic Review and Basic Statistics Volume 18
1. volume
Small StatesEconomic Review and Basic Statistics
Focus on financing for development
1818Small States18Small StatesSmall States18Small StatesEconomic Review and Basic Statistics18Economic Review and Basic Statistics
4. Foreword
This eighteenth issue of Small States: Economic Review and Basic Statistics focuses on
the future of overseas development assistance (ODA) and post-2015 development
financing in small island developing states (SIDS), a topic that is particularly important
in the lead-up to the United Nations’ summit on the post-2015 development agenda
in September 2015. The feature article by Travis Mitchell, Economic Adviser at the
Commonwealth Secretariat, reviews the decisions made by the Organisation for
Economic Co-operation and Development - Development Assistance Committee
(OECD-DAC) in December 2014 to reform the DAC statistical framework. Among
other things, the reforms could potentially increase the level of assistance to vulnerable
countries (including SIDS), revise reporting requirements for ODA, reconsider the
treatment of market instruments in ODA, and introduce a new measure of aid (total
official support for development). The paper assesses the impact these changes will
have on development financing in SIDS. It concludes that, for DAC members to meet
their commitment to expand assistance to SIDS, disbursements between 2015 and
2017 will have to be substantial, since ODA to SIDS is currently projected to fall by
approximately 2.4 per cent during this period.
As with past issues, the publication is split into two parts. Part I is divided into
three chapters. Chapter 1 provides a comparative analysis of economic and social
development in all small states while Chapter 2 has an individual country analysis for
each Commonwealth small state. Chapter 3 features the article on ODA reforms and
post-2015 development financing in SIDS. Part II of the publication contains tables on
basic social and economic data on small states.
This report is intended to be a reference document for stakeholders and policy-makers
in small states and their development partners as well as for specialists and academics
within the fields of economic and social policies.
The publication has been prepared by Denny Lewis-Bynoe, Head of Section, Wonderful
Hope Khonje, Economic Officer, Aimé Sindayigaya, Alicia Matheson, Elizabeth
Shepperson and Heather Cover-Kus, Research Officers, and Kirthika Selvakumar and
Mayeesha Jamil, Interns, all within the Economic Policy Division of the Commonwealth
Secretariat.
Janet Strachan
Director
Economic Policy Division
Commonwealth Secretariat
iii
5. What Are Small States?
The Commonwealth defines small states as sovereign countries with a population of 1.5
million people or fewer. The Commonwealth also designates some of its larger member
countries – Botswana, Jamaica, Lesotho, Namibia and Papua New Guinea – as small
states because they share many of the characteristics of small states. Thirty-one of the
fifty-three Commonwealth member countries are small states.
Thegroupofsmallstatesanalysedinthispublicationincludesothernon-Commonwealth
small states as defined by the World Bank (World Bank 2014). The total number of
countries in the small states group is 50.
Reference
World Bank (2014), ‘Small states’, available at: www.worldbank.org/en/country/
smallstates (accessed 4 September 2014).
Commonwealth small states
Africa
Botswana Namibia
Lesotho Seychelles
Mauritius Swaziland
Asia
Brunei Darussalam Maldives
The Caribbean
Antigua and Barbuda Guyana
Bahamas, The Jamaica
Barbados St Kitts and Nevis
Belize St Lucia
Dominica St Vincent and the Grenadines
Grenada Trinidad and Tobago
Europe
Cyprus Malta
The Pacific
Fiji Solomon Islands
Kiribati Tonga
Nauru Tuvalu
Papua New Guinea Vanuatu
Samoa
iv
6. Contents
Foreword iii
What Are Small States? iv
Abbreviations and acronyms x
Part I. Recent Trends in Commonwealth Small States 1
1. Economic and Social Development in Small States 1
1.1 Introduction 1
1.2 The global economic outlook 2
1.3 Economic growth in small states 3
1.4 Inflation 4
1.5 Unemployment 5
1.6 International trade 6
1.7 Competitiveness 8
1.8 Development aid 10
1.9 Remittances 12
1.10 Human and social development indicators 13
1.10.1 Human Development Index 13
1.10.2 The Commonwealth Youth Development Index 16
Glossary 16
References 18
2. Country Analysis 20
2.1 African small states 20
2.1.1 Botswana 20
2.1.2 Lesotho 20
2.1.3 Mauritius 20
2.1.4 Namibia 21
2.1.5 Seychelles 21
2.1.6 Swaziland 21
2.2 Asia-Pacific small states 22
2.2.1 Brunei Darussalam 22
2.2.2 Fiji 22
2.2.3 Kiribati 22
2.2.4 Maldives 22
2.2.5 Nauru 22
2.2.6 Papua New Guinea 23
v
7. 2.2.7 Samoa 23
2.2.8 Solomon Islands 23
2.2.9 Tonga 23
2.2.10 Tuvalu 24
2.2.11 Vanuatu 24
2.3 European small states 24
2.3.1 Cyprus 24
2.3.2 Malta 25
2.4 Caribbean small states 25
2.4.1 Antigua and Barbuda 25
2.4.2 The Bahamas 25
2.4.3 Barbados 26
2.4.4 Belize 26
2.4.5 Dominica 26
2.4.6 Grenada 26
2.4.7 Guyana 27
2.4.8 Jamaica 27
2.4.9 St Kitts and Nevis 27
2.4.10 St Lucia 27
2.4.11 St Vincent and the Grenadines 28
2.4.12 Trinidad and Tobago 28
References 28
3. ODA and Development Financing in SIDS Post 2015 31
Travis Mitchell
3.1 Summary 31
3.2 Introduction 32
3.3 DAC High-Level Committee decisions on post-2015 ODA reform 33
3.3.1 OECD-DAC mandates 33
3.3.2 The DAC High-Level Committee decisions 34
3.4 Development financing in SIDS and major OECD donor partners 35
3.4.1 Development financing 35
3.4.2 Major partners 35
3.5 The future of ODA in SIDS 37
3.5.1 Predictability power of donors’ future spending plans 37
3.5.2 DAC donors’ spending priorities related to SIDS 37
3.5.3 Projections for DAC donor spending in SIDS 40
3.6 Conclusions 43
Glossary 43
Appendix 3.1 Elaborated definition of ‘concessionality’ 45
Appendix 3.2 Donors’ spending plans 46
Appendix 3.3 Multilaterals’ spending plans 47
Part II. Social and Economic Data on Small States 48
Technical notes for tables
Table 1. Size of the economy 54
Table 2. Growth of the economy 60
vi Small States: Economic Review and Basic Statistics
9. List of figures
Figure 1.1 Small states per income group (% of total), 2013 2
Figure 1.2 Average GDP growth (%): world, advanced economies, and emerging
market and developing economies, 2005–2013 2
Figure 1.3 Average GDP growth (%) for small states and the world annually and
average for small states over time, 2005–2013 3
Figure 1.4 Average GDP growth for small states (%) per region, 2005–2013 4
Figure 1.5 Annual growth (%) in household final consumption in small states, 2005–2013 5
Figure 1.6 Average general government final consumption expenditure
(annual % growth), 2005–2013 5
Figure 1.7 Aggregate Inflation, consumer prices (annual %), 2005–2013 6
Figure 1.8 Average unemployment, total (% of total labour force) (modelled International
Labour Organization estimate) in small states, 2005–2013 6
Figure 1.9 Current account balance (% of GDP), 2005–2012 7
Figure 1.10 Food and fuel imports (% merchandise imports), 2005–2012 7
Figure 1.11 Average imports of goods and services (annual % growth) 8
Figure 1.12 Average exports of goods and services (annual % growth) 8
Figure 1.13 Intraregional trade of regional groups for export products, annual,
2005–2013 (%) 9
Figure 1.14 Intraregional trade of regional groups for import products, annual,
2005–2013 (%) 9
Figure 1.15 Net ODA received per capita (current US$) 12
Figure 1.16 Total debt service as percentage of GNI 12
Figure 1.17 Concessional debt (% of total external debt) 13
Figure 1.18 Personal remittances received (% of GDP) 13
Figure 1.19 Average personal remittances received (current US$ million) in small
states by region, 2005–2013 14
Figure 1.20 Average personal remittances received (% of GDP) in small states
by region, 2005–2013 14
Figure 1.21 HDI against YDI for selected Commonwealth small states 18
Figure 3.1 ODA by vulnerable group (US$, millions) 32
Figure 3.2 ODA by income category (US$, millions) 33
Figure 3.3 Total resource flows by modality (1960–2013, US$ millions) 34
Figure 3.4 ODA dependence in developing countries (ODA/GDP %) 36
Figure 3.5 Composition of ODA to SIDS 37
Figure 3.6 Dispersion of ODA grants and loans in SIDS (US$, millions) 37
Figure 3.7 Major multilateral donors to SIDS (2008–2012, US$ millions) 38
Figure 3.8 Major Multilateral Donors to SIDS (2008–2012, US$ millions) 39
List of tables
Table 1.1 Global Competitiveness Index for selected Commonwealth small states 10
Table 1.2 Commonwealth small states in the Ease of Doing Business Index 2015 11
Table 1.3 Social development indicators for Commonwealth small states 15
Table 1.4 Youth Development Index for Commonwealth small states 17
viii Small States: Economic Review and Basic Statistics
10. Table 3.1 List of OECD-DAC donors and SIDS recipients 36
Table 3.2 Compositions of major donors’ country programmable aid (CPA) 39
Table 3.3 DAC donor priorities, 2014–17 40
Table 3.4 Country programmable aid projections, 2014–17 41
Table A3.2.1 Availability of donors’ spending plans 46
Table A3.3.1 Availability of multilaterals’ spending plans 47
Contents ix
11. Abbreviations and acronyms
ADB Asian Development Bank
CPA country programmable aid
DAC Development Assistance Committee
EU European Union
FDI foreign direct investment
GDP gross domestic product
GNI gross national income
HDI Human Development Index
IHDI inequality-adjusted Human Development Index
IMF International Monetary Fund
LDC least developed countries
LLDC landlocked developing countries
ODA overseas development assistance
OECD Organisation for Economic Co-operation and Development
SIDS small island developing states
UN United Nations
UNCTAD United Nations Conference on Trade and Development
YDI Youth Development Index
x
12. Part I. Recent Trends in Commonwealth Small States
Chapter 1
Economic and Social Development in Small States
1.1 Introduction
Small states are not a homogeneous group of countries.
There are significant national, cultural and regional
differences between them. However, despite their
diversity, as a group small states face common challenges,
which arise as a consequence of their size. For example,
their small populations mean that their human capacity
is limited and human resources in both the public and
private sectors are often strained. Additionally, the small
size implies a modest tax base from which to draw the
governmentrevenueneededtofinancethepublicservices
that every sovereign country requires (such as building
airports, providing a justice system and educating young
people). The higher costs per person of these public
goods in small states further compound the problem.
Among small states, economic production is often
narrow and heavily concentrated on a few activities,
mainly around tourism, agriculture, fisheries and
off-shore financial services. As a consequence, these
economies are heavily exposed to developments
within or affecting these sectors. This concentrated
production structure usually implies that small states
tend to be very open (to purchase those items not
produced locally). Given the size of these economies,
there is limited capacity to harness natural resources
and to benefit from the economies of scale that would
allow them to become more competitive. Furthermore,
limited natural resources reduces the ability to
diversify the economy and extend production to
other sectors. There is, therefore, greater dependence
on strategic imports, particularly energy and food, in
small states than in larger countries. Small states are
heavily dependent on trade for economic development
and social progress. However, for some small states,
particularly those in the Pacific, their remoteness from
major markets, in terms of both imports and exports,
means that high transport costs are a barrier to trade.
Not surprisingly given the aforementioned, small states
facelowcompetitiveness.Theirsmalldomesticmarkets,
limited domestic natural and human resources, limited
scope for benefiting from economies of scale, and
remoteness constrain their ability to compete and
attract foreign direct investment (FDI).
Moreover, while many small island states hinge their
growth and development prospects on their unique
natural beauty and geographical location, these same
factors may sometimes give rise to their own set of
additional challenges. Small island developing states
(SIDS) are more likely to be vulnerable to major natural
disasters such as volcanic eruptions, hurricanes and
tsunamis. Furthermore, they face heightened threats
posed by global climate change and, although not
directly responsible for climate change, they have to
share (often disproportionately) in the consequences.
Given these challenges, it is not surprising that small
states’ public debt levels have risen sharply in several
Commonwealth small states since the first decade of
the twenty-first century. Although public debt for the
group as a whole declined by some 14 per cent between
2000 and 2012, this overall average masks significant
divergences when public debt is decomposed by region
and by income classification, with Caribbean small
states emerging as particularly heavily indebted.
Financing their development has been particularly
challenging for many small states, most of which have
been graduated from concessional financing on the
basis of their relatively high per capita incomes (see
Figure 1.1). Moreover, access to global capital markets
for critical development finance is difficult. There is
evidence that private markets tend to see small states
as more risky than larger states, resulting in access
challenges, high interest rates and extremely high debt
and debt financing costs.
It is important to consider how the challenges outlined
above have affected small states’ economic and social
development. Accordingly, this chapter takes a more
detailed look at the performance of both Commonwealth
and non-Commonwealth small states in 2013–14
and compares it with that of larger developing and
advanced economies. It aims to provide a synopsis of
1
13. the recent economic and social trends in these countries
based on key factors that have a significant impact on
their sustainable growth and development including
gross domestic product (GDP) growth, inflation rates,
internationaltrademeasures,debtlevels,competitiveness,
development aid and remittances. Furthermore, it looks
at other indicators of development, such as the Human
Development Index, and the Youth Development Index
developed by the Commonwealth Secretariat.
1.2 The global economic outlook
As small states are international price takers, any
analysis of their economic performance must be set in
the wider context of the health of the global economy.
Interestingly, 2013 was a year of slow transition out
of recession for many large countries. According to
the International Monetary Fund (IMF), the growth
forecast for the world economy was 3.3 per cent in
Figure 1.1 Small states per income group (% of total), 2013
6.67
31.11
42.22
20.00
Low income Lower-middle income Upper-middle income High income
Note: Low income, US$1,035 or less gross national income (GNI) per capita; lower-middle income, US$1,036–4,085 GNI per capita;
upper-middle income, US$4,086–12,615 GNI per capita; high income, US$12,616 or more GNI per capita.
Source: Commonwealth Secretariat calculations, data: World Bank (2015).
Figure 1.2 Average GDP growth (%): world, advanced economies, and emerging market and
developing economies, 2005–2013
–4
–2
0
2
4
6
8
2005 2006 2007 2008 2009 2010 2011 2012 2013
GDPGrowth(%)
Emerging market and developing economies Advanced economies World
Source: World Bank (2015)
2 Small States: Economic Review and Basic Statistics
14. 2014, rising to 3.8 per cent in 2015, largely as a result
of weaker than expected global activity in the first half
of 2014 (IMF 2014). Advanced economies gradually
strengthened. While the USA enjoyed robust private
sector demand, its growth was tapered by strong fiscal
consolidation. Both Japan and the core economies
of Europe showed signs of recovery, yet southern
Europeancountriescontinuedtostruggle.However,the
major news came from emerging market economies,
where growth declined – often by more than previously
forecast. In Russia and South Africa this decline was a
part of the ebbs and flows of the economic cycle, while
in India and China the slowing growth rate reflects the
economies gearing down as they reach their production
capacities. Overall, the global economy continued to
show signs of recovering from the economic crisis,
albeit slowly.
1.3 Economic growth in small states
Given the very slow global economic recovery, it is not
surprising that, as a group, small states experienced
an average growth rate below those of both emerging
market economies and the world average for 2013–14.
In general, the increased private demand in advanced
economies has yet to make a significant impact
on demand for goods and services in small states.
Additionally, internal demand has been sluggish and
many governments are still facing high debt burdens.
Small states’ relatively high GNI per capita may
mask the challenges they face to achieve and sustain
economic growth. As shown in Figure 1.3, the average
real GDP growth rate in small states between 2005 and
2013 was 3.16 per cent. Over this period, there were
significant peaks of 5.68 per cent in 2007 and troughs
of –0.94 per cent in 2009 due to the global recession.
It is important to note that small states’ growth has
consistently tracked below the world average. The gap
between the two trajectories seems to widen during
periods of growth (2005) and narrow during times of
decline (2008). The economic recovery which began
in 2010 seems to have lagged for small states. At 2.23
per cent, average GDP growth for small states in 2013
remains below its nine-year average of 3.16 per cent.
Looking at growth within small states by region (Figure
1.4) is informative, as some regions fare better than
others. It is clear that oil-rich small states in the Middle
East have almost consistently maintained higher
growth rates than their counterparts in other regions.
They are also recovering more quickly from the
recession of 2009 and the economic downturn of 2012,
with a growth rate of 5.83 per cent in 2013. Given the
struggles of many European Union (EU) countries in
the recent past, perhaps it is not surprising that growth
in the European small states has been the most volatile
of the regions since 2010. After recording relatively
high growth rates, they experienced the biggest decline
during the worst of the global recession, with growth
rates falling 12.86 percentage points between 2007 and
2009. Following positive growth rates in 2010 and 2011
Figure 1.3 Average GDP growth (%) for small states and the world annually and average for small
states over time, 2005–2013
–2
–1
0
1
2
3
4
5
6
7
2005 2006 2007 2008 2009 2010 2011 2012 2013
GDPGrowtn
Small states average 2005–2013 Small states average per year World average per year
Source: World Bank (2015)
Economic and Social Development in Small States 3
15. of 1.52 and 3.09 per cent respectively, growth fell again
in 2012 to 0.39 per cent in 2012. However, like their
larger European neighbours, these states are slowly
beginning to rebound, with a growth rate of 1.19 per
cent in 2013.
Asian small states have struggled recently, with average
growth rates slowing from 8.12 per cent in 2011 to
1.34 per cent in 2013 because of the slowed growth
in larger regional trading partners such as India and
China. Conversely, Caribbean small states have grown
consistently, although marginally, since 2009, peaking
at a growth rate of 1.67 per cent in 2013. The marginal
growth in Jamaica and The Bahamas (0.2 per cent and
0.7 per cent, respectively) was balanced by the strong
performance in Guyana, which recorded a growth rate
of 5.2 per cent in 2013. Growth in oil-rich Trinidad and
Tobago was near the regional average at 2.1 per cent in
2013.
The growth patterns for African and Pacific small
states have both slowed, but at different magnitudes.
African small states recorded a growth rate of 3.35
per cent in 2013, which is slightly lower than its 2011
rate of 4.21 per cent. Pacific small states have had a
somewhat slower rate of growth between 2011 and
2013, moving from 4.57 per cent in 2011 to 1.46 per
cent in 2013.
Slow growth in key trading partners’ economies has
contributed to the low growth rates seen in many small
states.
Both household consumption spending (Figure 1.5)
and government final expenditure (Figure 1.6) have
also had a negative impact on GDP growth in small
states. After rising to 4.11 per cent in 2010, household
spending fell again to 1.25 per cent in 2013. Average
government expenditure growth in small states has
followed a downward trend since 2006 and despite
a slight uptick in 2012, fell to 3.6 per cent in 2013
(Figure 1.6). Interestingly, since 2008 the rate in
small states has been below the world average, which
reflects efforts of fiscal consolidation. However, in
2013 small states’ spending again rose above the
world average.
1.4 Inflation
Global price inflation had a slower rate of growth,
moving from 2.63 per cent in 2013 to 2.52 per cent in
2014 because of a decrease in the price of oil and other
commodities coupled with a decrease in demand
in many states (World Bank 2015b). This trend is
expected to continue into 2015 (IMF 2015). Forecasts
predict that global inflation will remain around 3 per
cent until 2017, but there will be significant regional
differences.
Average inflation in developed economies is set to
remain below central bank policy targets as a result of
substantial output gaps. In the EU, inflation remained
below average because of unemployment and mild
deflation in consumer prices. In the USA, although
inflation rose in the first half of 2014, it remained below
the Federal Reserve’s target of 2 per cent. However,
inflation in emerging market economies remained
broadly stable.
Inflation in developing nations is set to fall slowly.
Many African economies should see a fall in inflation
in the coming years as a result of the implementation
of cautious monetary policies (United Nations 2015).
Figure 1.4 Average GDP growth for small states (%) per region, 2005–2013
–8
–6
–4
–2
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013
AverageGDPGrowth(%)
Caribbean small states Pacific small states Asian small states
African small states European small states Middle East small states
Source: World Bank (2015)
4 Small States: Economic Review and Basic Statistics
16. Small states have seen an overall decline in average
inflation levels since the peak of 9.08 per cent in 2008,
as shown in Figure 1.7 (see also Table 4 in Part 2).
Following an increase between 2009 and 2011 (from 0.8
per cent to 6.03 per cent) during the global economic
recovery, levels are falling once more. Average inflation
in small states stood at 2.76 per cent in 2013. Pacific
small states experienced the lowest average inflation
between 2005 and 2013, while Middle Eastern small
states had the highest.
1.5 Unemployment
As seen in Figure 1.8, unemployment in small states
remains higher than in other country groups. The
average rate of unemployment in small states returned
to double figures, registering 10.2 per cent in 2013.
The decline in GDP growth in small states, highlighted
in Figure 1.3, has translated to an increase in the
unemployment rate, which is up from 9.98 per cent
in 2012. In 2014, the unemployment rate was forecast
Figure 1.5 Annual growth (%) in household final consumption in small states, 2005–2013
–2
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013
Annualgrowth(%)
Small states Emerging market and developing economies Advanced economies World
Source: World Bank (2015)
Figure 1.6 Average general government final consumption expenditure (annual % growth),
2005–2013
–2
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013
Annualgrowth(%)
Small states Emerging market and developing economies Advanced economies World
Source: World Bank (2015)
Economic and Social Development in Small States 5
17. to rise despite an expected improvement in GDP,
suggesting jobless growth.
1.6 International trade
International trade performances have improved over
the last few years. According to the United Nations
Conference on Trade and Development (UNCTAD),
world trade in goods reached US$18.8 trillion in
2013 (up from US$18.3 trillion in 2012), and trade in
services rose to US$4.7 trillion from US$4.3 trillion.
Low import demands and reduced commodity prices
have prevented substantial trade growth. Developing
countries are increasing their share, albeit slowly,
within the global market. However, developed nations
still account for around half of the world’s trade in
goods and two-thirds in services (UNCTAD 2014). In
2013, small states accounted for 1.25 per cent of the
world value of exports and 0.78 per cent of imports of
merchandise. For services, they contributed 0.78 per
cent of the value of global exports, and accounted for
1.20 per cent of global imports (UNCTAD 2015).
Figure 1.9 shows that, on average, small states had
higher current account deficits than emerging market
Figure 1.7 Aggregate Inflation, consumer prices (annual %), 2005–2013
0
2
4
6
8
10
12
14
2005 2006 2007 2008 2009 2010 2011 2012 2013
Annual%
Small states Emerging market and developing economies Advanced economies World
Source: World Bank (2015)
Figure 1.8 Average unemployment, total (% of total labour force) (modelled International Labour
Organization estimate) in small states, 2005–2013
5
6
7
8
9
10
11
2005 2006 2007 2008 2009 2010 2011 2012 2013
%oftotallaborforce
Small states Emerging market and developing economies Advanced economies World
Source: World Bank (2015)
6 Small States: Economic Review and Basic Statistics
18. and developing and advanced economies between
2005 and 2012. These deficits are due in part to the
high proportion of food, fuel and essential goods in
merchandise imports for small states compared with
larger countries (see Figure 1.10), and to a narrow
range of exports.
Imports grew by an average of 3.16 per cent in small
states in 2013, as highlighted in Figure 1.11, driven
mainly by an increase across Pacific small states. In the
same period, exports grew by 4.22 per cent (see Figure
1.12), driven by African small states, whose export
average grew by 8.53 per cent for the year.
At the country level among small states, Barbados and
The Gambia saw the highest relative increases in their
exports, whereas Swaziland and Vanuatu saw the biggest
increases in their imports between 2012 and 2013.
Within this same period, Seychelles, Swaziland and
Papua New Guinea saw the biggest decreases in their
exports, whereas Botswana, The Bahamas and Brunei
Darussalam saw the biggest decreases in their imports.
Intraregional trade has been of great significance for
East Asian countries, amounting to 50 per cent of East
Asian Trade; it has been of less significance within
Latin America, amounting to only 20 per cent of trade;
and in other regions intraregional trade is worth only
10 per cent or less of all trade (UNCTAD 2014).
Although intraregional trading is important for small
states, trade between the members tends to be higher
for exports than for imports, as shown in Figures 1.13
and 1.14. Both Caribbean Community (CARICOM)
members and Southern African Development
Community (SADC) countries engage in a significant
Figure 1.9 Current account balance (% of GDP), 2005–2012
–5
–4
–3
–2
–1
0
1
2
%GDP
Small states Emerging market and developing economies Advanced economies
Source: World Bank (2015)
Figure 1.10 Food and fuel imports (% merchandise imports), 2005–2012
0
5
10
15
20
Small states Emerging market and
developing economies
Advanced economies
%ofmerchandiseimports
Food Fuel
Source: UNCTAD (2014)
Economic and Social Development in Small States 7
19. amount of intrabloc trade on both the export and
import sides. Interestingly, although exports between
Organisation of Eastern Caribbean States (OECS)
countries climbed from 11.6 per cent of the group’s
total exports in 2009 to 15 per cent in 2013, imports
remained around 1.7 per cent of total imports during
the same period. This suggests that imports among
those countries are growing. Trade among the four
independent members of the Melanesian Spearhead
Group(FijiIslands,PapuaNewGuinea,SolomonIslands
and Vanuatu) was low for both exports and imports, at
1.6 per cent and 1 per cent, respectively in 2013.
It should be noted, however, that many small states are
in trading blocs with other larger countries in the same
region. In particular, the Common Market for Eastern
and Southern Africa (COMESA) and SADC are made
of up several larger African countries in addition to the
smaller ones.
1.7 Competitiveness
Some small states improved their position in the
World Economic Forum Global Competitiveness
Index between 2013 and 2014. Of the 144 countries
Figure 1.11 Average imports of goods and services (annual % growth)
–15
–10
–5
0
5
10
15
2005 2006 2007 2008 2009 2010 2011 2012 2013
Annual%growth
Small states Emerging market and developing economies Advanced economies World
Source: World Bank (2015)
Figure 1.12 Average exports of goods and services (annual % growth)
–15
–10
–5
0
5
10
15
2005 2006 2007 2008 2009 2010 2011 2012 2013
Annual%growth
Small states Emerging market and developing economies Advanced economies World
Source: World Bank (2015)
8 Small States: Economic Review and Basic Statistics
20. in the index, 11 are Commonwealth small states and 8
of these appeared in the top 100. Table 1.1 shows that
Mauritius is the most competitive small state, moving
up six places between the 2013–14 and 2014–15
rankings. Its improved status could be due to the wide-
ranging structural reforms that have taken place since
2006, which are now delivering positive change. Of
the small states surveyed, Lesotho has seen the biggest
improvement in its competitiveness, climbing 16 places
since 2013–14.
Table 1.2 details the Ease of Doing Business rankings
for Commonwealth small states. Among other things,
this scale is an indicator of a country’s business
Figure 1.13 Intraregional trade of regional groups for export products, annual, 2005–2013 (%)
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013
%
CARICOM (Caribbean Community) COMESA (Common Market for Eastern and
Southern Africa)MSG (Melanesian Spearhead Group)
OECS (OrganisaƟon of Eastern Caribbean States)SADC (Southern African Development Community)
Source: UNCTAD (2015)
Figure 1.14 Intraregional trade of regional groups for import products, annual, 2005–2013 (%)
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010 2011 2012 2013
%
CARICOM (Caribbean Community) COMESA (Common Market for Eastern and Southern Africa)
MSG (Melanesian Spearhead Group) OECS (OrganisaƟon of Eastern Caribbean States)
SADC (Southern African Development Community)
Source: UNCTAD (2015)
Economic and Social Development in Small States 9
21. environment, and, by extension, of its ability to attract
investment. A number of small states have seen an
improvement in their Ease of Doing Business rankings
from 2014 to 2015, with Jamaica seeing the greatest
improvement, jumping 27 places. This increase was
due to improvements in credit reporting, as two new
credit bureaux, Creditinfo Jamaica and CRIF-NM
Credit Assure Limited, began operations. Furthermore,
a new law on secured transactions was adopted which
increased the range of assets that could be used as
collateral (World Bank 2014a).
Mauritius remained at the top of the competitiveness
ranking for small states. Mauritius was also placed
highest in the Ease of Doing Business ranking out of the
small states, improving its position by one from the 2014
rankings. This suggests that it has an environment that is
more favourable to encouraging businesses and thereby
engendering a more competitive economy. Botswana,
Fiji and Namibia all fell eight places in the global
ranking, while Kiribati remains at the bottom of the
list for small states. Nonetheless, it is important to look
beyond the ranking to gain the full picture of business
concerns in any particular country. For instance, even
though The Bahamas and Dominica are both ranked
at 97, their challenges are vastly different. While The
Bahamas struggles with property registration, in
Dominica the difficulty lies with resolving insolvency.
1.8 Development aid
According to the OECD, net official development
assistance (ODA) increased by 5.9 per cent between
2012 and 2013, totalling US$134.48 billion (OECD
2015). In 2013, small states, on average, received
US$380.24 per capita. The Pacific region received the
most aid, with a regional average of US$966.28 per
capita, more than 2.5 times that of all small states.
Of the 50 small states analysed, 39 received ODA in
2013, of which 24 are Commonwealth small states.
Although small states received relatively high ODA per
capita overall, as shown by Figure 1.15, the amounts
received varied greatly. For example, in 2012 Tuvalu
received the most aid globally per capita (US$2483.77)
and Jamaica received the least (US$7.77). High levels
of ODA per capita are also more of a reflection of small
states’ populations than of large levels of total ODA.
The decline in ODA per capita between 2011 and
2012 seen in Figure 1.15 was driven by tough fiscal
adjustments in donor countries resulting from their
economic challenges.
Many small states are plagued with heavy debt burdens
which have implications for growth. Debt servicing
redirects resources from needed capital investments
and stymies future growth prospects. There has been
an upward trend in total debt service as a percentage
of GNI for commonwealth small states, as shown in
Figure 1.16.
Figure 1.17 highlights the levels of concessional debt
as a percentage of total external debt. The decline in
concessional debt levels is because ODA levels have
been decreasing even though overall debt levels have
been increasing. However, in 2013 the figure rose
slightly, with concessional debt accounting for nearly
half of total external debt.
Table 1.1 Global Competitiveness Index for selected Commonwealth small states
Country Global
Competi
tiveness Index
2014–15
Global
Competi
tiveness Index
2013–14
Basic
requirements
2014–15
Market size
2014–15
Efficiency
enhancers
2014–15
Innovation
2014–15
Mauritius 39 45 38 113 59 76
Malta 47 41 35 126 44 45
Cyprus 58 58 58 115 57 36
Botswana 74 74 72 97 84 102
Jamaica 86 94 99 107 77 75
Namibia 88 90 81 119 97 91
Trinidad and
Tobago
89 92 52 112 81 100
Seychelles 92 80 50 143 105 73
Lesotho 107 123 102 139 130 110
Guyana 117 102 118 135 109 55
Swaziland 123 124 108 136 126 112
Source: Global Competitiveness Report (World Economic Forum 2014)
10 Small States: Economic Review and Basic Statistics
23. 1.9 Remittances
International migrants from developing countries are
estimated to have sent US$436 billion in remittances
to their home countries in 2014, an increase of 7.8 per
cent from 2013. According to the World Bank this
figure is expected to increase to US$516 billion in 2016.
For many small states, remittances are of greater
importance than ODA, as their middle-income country
classification precludes them from receiving ODA. As
shown in Figure 1.18, personal remittances form a
substantial percentage of small states’ GDP. From 2005
to 2013, personal remittances averaged 6.17 per cent of
small states’ GDP. However, there was a sharp decline
between 2012 and 2013, driven mainly by a more than
3 per cent decrease in remittances to Asian small states
and a 2 per cent decrease in those to African small
states. For advanced economies, remittances made up
only 0.61% of GDP on average. This decline could be
due to the decrease in total net migration from all small
states, from 1,265,415 people in 2007 to 693,384 people
in 2012.1
These averages mask the varied role of remittances in
different small state regions. As shown by Figures 1.19
and 1.20, despite high levels of average remittances in
small states in the Middle East, the remittances account
for less than 0.5 per cent of GDP for these countries.
Conversely, the more modest levels of remittances in the
Pacific region constituted a more substantial 7.82 per
cent of GDP in 2013. Within the Caribbean region there
has been an overall upward trend in the level of average
personal remittances, but as a percentage of GDP it has
Figure 1.15 Net ODA received per capita (current US$)
0
50
100
150
200
250
300
350
400
450
2005 2006 2007 2008 2009 2010 2011 2012 2013
NetODAreceivedCurrentUS$
Small states Emerging market and developing economies World
Source: World Bank (2015)
Figure 1.16 Total debt service as percentage of GNI
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
2005 2006 2007 2008 2009 2010 2011 2012 2013
%ofGNI
Small states Emerging market and developing economies World
Source: World Bank (2015)
12 Small States: Economic Review and Basic Statistics
24. remained fairly constant, whereas in the Pacific region
the overall level of remittances has increased, but they
have decreased as a percentage of GDP.
1.10 Human and social development
indicators
1.10.1 Human Development Index
The 2014 Human Development Index (HDI) ranks
187 countries according to key measures of human
development. These measures are living a long and
healthy life, being educated and having a decent
standard of living. The HDI is a geometric mean of
normalised indices for each of the three dimensions.
In the 2014 HDI, the rankings are split into four
groupings defined by cut-off points: very high (above
0.8), high (above 0.7), medium (above 0.55) and low
human development (below 0.55). This is a change
from previous years, when the rankings were based on
the country’s quartile in the HDI distribution.
As shown in Table 1.3, the majority of Commonwealth
small states (15) have high human development, and
seven have medium levels of human development.
Further to this, 16 of the small states have not seen
Figure 1.17 Concessional debt (% of total external debt)
30
35
40
45
50
55
60
2005 2006 2007 2008 2009 2010 2011 2012 2013
%
Small states Emerging market and developing economies World
Source: World Bank (2015)
Figure 1.18 Personal remittances received (% of GDP)
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
2005 2006 2007 2008 2009 2010 2011 2012 2013
%ofGDP
Small states Emerging market and developing economies World
Source: World Bank (2015)
Economic and Social Development in Small States 13
25. a change in their rank from 2012. Tonga, Belize and
Fiji have moved from the medium to the high human
development group, whereas Barbados and Seychelles
have regressed from high to medium.
The HDI as an average masks inequality or uneven
distributions of development gains. It is important to
understand if gains in human development are being
spreadequallyacrosssocietytodeveloptargetedpolicies
and programmes. The United Nations Development
Programme (UNDP)’s inequality-adjusted HDI (IHDI)
takes into account losses attributable to inequality,2 and
highlights how the achievements in health, education
and income are distributed across the population.
Of the 15 Commonwealth small states for which we
have data, Malta has seen the smallest loss because of
inequality, whereas Namibia has seen the biggest drop
with a loss of 43.6 per cent, which reduces its ranking
by 22 places.
Health, education and income inequality are not the only
factors that can hinder development progress. Gender
Figure 1.19 Average personal remittances received (current US$ million) in small states by region,
2005–2013
0
100
200
300
400
500
600
700
800
2005 2006 2007 2008 2009 2010 2011 2012 2013
currentUS$million
Caribbean small states Pacific small states Asian small states
African small states European small states Middle East small states
Note: No data are available for Middle East small states prior to 2011.
Source: World Bank (2015)
Figure 1.20 Average personal remittances received (% of GDP) in small states by region, 2005–2013
0
2
4
6
8
10
12
14
2005 2006 2007 2008 2009 2010 2011 2012 2013
%ofGDP
Caribbean small states Pacific small states Asian small states
African small states European small states Middle East small states
Note: No data are available for Middle East small states prior to 2011.
Source: World Bank (2015)
14 Small States: Economic Review and Basic Statistics
26. Table 1.3 Social development indicators for Commonwealth small states
HDI rank Country HDI value 2013 Change in HDI
rank 2012–13
Inequality-
adjusted HDI
(IHDI) 2013
Gender
Inequality Index
2013
Very high human development
30 Brunei Darussalam 0.852 0 n/a n/a
32 Cyprus 0.845 0 0.752 0.136
39 Malta 0.829 0 0.769 0.220
High human development
51 Bahamas, The 0.789 0 0.676 0.316
59 Barbados 0.776 –1 n/a 0.350
61 Antigua and Barbuda 0.774 –1 n/a n/a
63 Mauritius 0.771 0 0.662 0.375
64 Trinidad and Tobago 0.766 0 0.649 0.321
71 Seychelles 0.756 –1 n/a n/a
73 St Kitts and Nevis 0.750 0 n/a n/a
79 Grenada 0.744 –1 n/a n/a
84 Belize 0.732 0 n/a n/a
88 Fiji 0.724 0 0.613 n/a
91 St Vincent and the
Grenadines
0.719 0 n/a n/a
93 Dominica 0.717 –1 n/a 0.457
96 Jamaica 0.715 –3 0.579 n/a
97 St Lucia 0.714 –4 n/a 0.458
100 Tonga 0.705 0 n/a 0.316
Medium human development
103 Maldives 0.698 0 0.521 0.283
106 Samoa 0.694 –2 n/a 0.517
109 Botswana 0.683 –1 0.422 0.486
121 Guyana 0.638 0 0.522 0.524
127 Namibia 0.624 0 0.352 0.450
131 Vanuatu 0.616 –3 n/a n/a
133 Kiribati 0.607 0 0.416 n/a
Low human development
148 Swaziland 0.530 0 0.354 0.529
157 Papua New Guinea 0.491 –1 n/a 0.617
157 Solomon Islands 0.491 0 0.374 n/a
162 Lesotho 0.486 1 0.313 0.557
Other countries or territories
Nauru n/a n/a n/a n/a
Tuvalu n/a n/a n/a n/a
n/a, data not available.
HDI groups HDI value
Very high human development 0.890
High human development 0.735
Medium human development 0.614
Low human development 0.493
Least developed countries 0.487
SIDS 0.665
World 0.702
Commonwealth small states 0.698
Source: UNDP (2014)
Economic and Social Development in Small States 15
27. inequality remains a major barrier to development
across the globe, and discrimination between gender
groups has severely hampered the development of
many countries. The Gender Inequality Index measures
gender inequality using three indicators – reproductive
health, empowerment and labour market participation –
and measures the loss of achievement attributable
to gender inequality. Cyprus has the lowest score for
gender inequality out of the Commonwealth small
states (meaning it has the smallest loss of achievement),
followed by Malta and the Maldives (which is ranked at
49 in the Gender Inequality Index compared with 103 in
the HDI).
1.10.2 The Commonwealth Youth
Development Index
Currently, over 87 per cent of young people live in a
developing country. Further to this, of the two billion
people living in the 54 Commonwealth member
countries, 60 per cent are under 30 years old. Youth
development is vital for young people to reach their
potential and spur development.
The Commonwealth Youth Development Index (YDI)
is a composite index comprising 15 key indicators
which collectively measure youth development in 170
countries. It is the first index to attempt to collate and
aggregate global youth-specific data and its objective
is to help drive the Commonwealth Plan of Action
for Youth Empowerment by providing a reliable and
informative tool that aggregates key available data on
youth development. The YDI has five domains, which
measure young people’s levels of education, health and
wellbeing, employment, political participation and
civic participation. The index scores range from 0 to 1,
with 1 representing the highest possible level of youth
development attainable and 0 representing no youth
development. A key constraint of the index is the lack of
data, particularly in developing countries that are still
developing their statistical systems. Youth development
is vital for young people to be able to engage fruitfully
in education, employment, and health and wellbeing
activities and gain civic and political empowerment.
As can be seen from Table 1.4, the majority of
Commonwealth small states are categorised as having
medium youth development. This means that young
people in small states have reasonable opportunities for
development available to them.
Figure1.21showstheYDIscoreplottedagainsttheHDI
score for the Commonwealth small states. Comparing
the HDI and YDI highlights the presence of any
development gaps and illustrates whether or not gains
in human development are even across different age
groupswithinsociety.Thegraphsuggeststhat,formany
small states, the development achievements are shared
with the youth population, with the majority of small
states achieving medium levels of youth development
alongside either medium or high human development.
However, there are a few outliers. As shown in the
graph, one small state falls into the high HDI category
but into the low category for YDI, highlighting that
the high levels of human development are not felt
among the youth population. It is important to ensure
that development is realised across all segments of the
population to prevent marginalisation and conflict,
and ensure that the future generations of a nation are
given appropriate opportunities.
Glossary3
Competitiveness: The set of institutions, policies and
factors that determine the level of productivity of a
country. (Source: World Economic Forum 2014)
Ease of Doing Business: Ranking from 1 to 189. A high
Ease of Doing Business ranking means the regulatory
environment is more conducive to starting and
operating a local firm. The rankings are determined
by sorting the aggregate distance to frontier scores
on 10 topics, each consisting of several indicators,
giving equal weight to each topic. The rankings for all
economies are benchmarked to June 2014.
Income classification: As of 1 July 2014, low-income
economies are defined as those with a GNI per capita,
calculated using the World Bank Atlas method, of
US$1,045orlessin2013;middle-incomeeconomiesare
those with a GNI per capita of more than US$1,045 but
less than US$12,746; high-income economies are those
with a GNI per capita of US$12,746 or more. Lower-
middle-income and upper-middle-income economies
are separated at a GNI per capita of US$4,125.
Inflation, consumer prices (annual %): The annual
percentage change in the cost to the average consumer
of acquiring a basket of goods and services that may be
fixed or changed at specified intervals, such as yearly.
Intraregional exports: The exports of a trading bloc to
other members of the bloc as a percentage of the bloc’s
total exports.
Intraregional imports: The imports of a trading bloc to
other members of the bloc as a percentage of the bloc’s
total imports.
Net official development assistance (ODA) per capita:
Disbursements of loans made on concessional terms
(net of repayments of principal) and grants by official
agencies of the members of the Development Assistance
Committee (DAC), by multilateral institutions and by
16 Small States: Economic Review and Basic Statistics
28. Table 1.4 Youth Development Index for Commonwealth small states
Country Rank YDI score Classification
Australia 1 0.86 High
Canada 2 0.82 High
South Korea 3 0.81 High
The Netherlands 4 0.80 High
Germany 5 0.80 High
New Zealand 6 0.80 High
Switzerland 7 0.80 High
USA 8 0.80 High
Japan 9 0.79 High
Slovenia 10 0.79 High
Malta 14 0.77 High
Cyprus 21 0.75 Medium
Jamaica 22 0.75 Medium
Singapore 23 0.74 Medium
Trinidad and Tobago 28 0.74 Medium
Guyana 31 0.73 Medium
Belize 38 0.72 Medium
Mauritius 39 0.72 Medium
Bahamas, The 40 0.72 Medium
Barbados 43 0.72 Medium
Samoa 44 0.72 Medium
Tonga 46 0.71 Medium
Maldives 62 0.69 Medium
Antigua and Barbuda 87 0.63 Medium
Dominica 93 0.62 Medium
Botswana 105 0.55 Medium
Vanuatu 107 0.54 Medium
St Lucia 109 0.53 Medium
Brunei Darussalam 112 0.53 Medium
Fiji 113 0.52 Medium
Lesotho 115 0.52 Medium
Seychelles 117 0.50 Medium
Namibia 121 0.49 Medium
Papua New Guinea 122 0.48 Medium
Grenada 127 0.47 Medium
Solomon Islands 130 0.44 Medium
St Vincent and the Grenadines 135 0.43 Medium
Swaziland 160 0.30 Low
St Kitts and Nevis 161 0.30 Low
Kiribati 163 0.29 Low
Guinea-Bissau 170 0.26 Low
Somalia 171 0.26 Low
Mali 172 0.24 Low
Chad 173 0.24 Low
Ivory Coast 174 0.23 Low
Central African Republic 175 0.23 Low
Tuvalu 176 0.19 Low
Nauru 177 0.18 Low
Congo, Democratic Republic 178 0.17 Low
Taiwan 179 0.17 Low
Countries in bold are Commonwealth small states. The top 10 and bottom 10 ranked states and Singapore have been
included for comparison purposes.
Source: Commonwealth (2013)
Economic and Social Development in Small States 17
29. non-DAC countries to promote economic development
and welfare in countries and territories in the DAC list
of ODA recipients; calculated by dividing net ODA
received by the midyear population estimate. It includes
loans with a grant element of at least 25 per cent
(calculated at a rate of discount of 10 per cent).
Personal remittances received (% of GDP): Personal
transfers and compensation of employees. Personal
transfers consist of all current transfers in cash or in
kind made or received by resident households to or
from non-resident households. Personal transfers thus
include all current transfers between resident and non-
resident individuals. Compensation of employees refers
to the income of border, seasonal and other short-term
workers who are employed in an economy where they
are not resident and of residents employed by non-
resident entities. Data are the sum of two items defined
in the sixth edition of the IMF’s Balance of Payments
Manual: personal transfers and compensation of
employees.
Total debt service (% of GNI): The sum of principal
repayments and interest actually paid in currency,
goods or services on long-term debt, interest paid on
short-term debt and repayments (repurchases and
charges) to the IMF.
Notes
1 These figures are calculated from five-year estimates from
World Bank data.
2 When the IHDI and the HDI are equal there is no inequality
within the country. However, when the IHDI falls below the
HDI, inequality increases. The smaller the difference between
the IHDI and the HDI, expressed as a percentage of HDI, the
smaller the loss as a result of inequality.
3 These are World Bank definitions, unless otherwise stated.
References
Commonwealth (2013), Youth Development Index:
Results Report, The Commonwealth, London.
IMF (2014), ‘World Economic Outlook 2014’, available
at: www.imf.org/external/pubs/ft/weo/2014/02/
pdf/text.pdf (accessed 29 June 2015).
IMF (2015), World Economic Outlook: Uneven Growth –
Short- and Long-term Factors, International
Monetary Fund, Washington.
OECD (2015), ‘2012 and 2013 DAC flows at a glance’,
available at: https://public.tableausoftware.com/
views/AidAtAGlance/DACmembers?:embed=y&:
display_count=no?&:showVizHome=no#1
(accessed 29 June 2015).
UNCTAD (2014), ‘Key statistics and trends in
internationaltrade2014’,availableat:http://unctad.
Figure 1.21 HDI against YDI for selected Commonwealth small states
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
YouthDevelopmentIndex
Human Development Index
Low HDI Medium HDI High HDI Very high HDI
LowYDIMediumYDIHighYDI
Source: Authors’ calculations
18 Small States: Economic Review and Basic Statistics
30. org/en/PublicationsLibrary/ditctab2014d2_en.pdf
(accessed 29 June 2015 ).
UNCTAD (2015), ‘UNCTAD Stat’, available at: http://
unctadstat.unctad.org/wds/ReportFolders/
reportFolders.aspx?sCS_ChosenLang=en (accessed
29 June 2015).
UNDP (2014), Human Development Report 2014:
SustainingHumanProgress–ReducingVulnerabilities
and Building Resilience, UNDP, New York, NY.
United Nations (2015), ‘World economic situation
and prospects 2015’, available at: www.un.org/
en/development/desa/policy/wesp/wesp_
archive/2015wesp_chap1.pdf(accessed29June2015).
World Bank (2014a), Doing Business 2015: Going
beyond Efficiency, World Bank, Washington, DC.
World Bank. (2015a). ‘Indicators’. Availabe at: http://
data.worldbank.org/indicator (accessed 24 June
2015)
World Economic Fourm (2014). The Global
Competitiveness Report 2014–2015: Full Data
Edition. Geneva: World Economic Fourm.
Economic and Social Development in Small States 19
31. Chapter 2
Country Analysis
2.1 African small states
2.1.1 Botswana
Real GDP growth in 2013 was estimated at 5.9 per cent
compared with 4.2 per cent in 2012. This increase was
mainlyattributabletoan11percentgrowthinthemining
sector following a 7 per cent contraction in 2012 (Bank
of Botswana 2013). Real GDP is estimated to have risen
by 4.4 per cent in 2014, driven primarily by diamond
production and other value-added activity. However,
uncertain external issues affecting the country’s mining
sector,suchasBotswanapotentiallylosingitspreferential
trade access to the EU market, could threaten economic
growth. On the domestic front, problems in energy and
water supply could also dampen the estimated GDP of
Botswana, as they hamper the performance of the non-
mineral sector (IMF 2014a).
Inflation fell from 7.4 per cent (Bank of Botswana
2013) in December 2012 to 5.9 per cent (EIU 2014a)
in December 2013. It was forecast to fall to 4.6 per
cent (EIU 2014a) by the end of 2014 because of the
appreciation of the Botswana pula against the South
African rand.
The government recorded a small fiscal surplus in
2013–14 of 1.1 per cent of GDP. The budget surplus was
achieved because of higher mining revenue (EIU 2014a).
The 2014–15 budget surplus was projected to rise to 1.2
per cent because revenue from mineral tax, income and
value-added tax (VAT), and customs were projected to
rise by 11–14 per cent, whereas current expenditures
were expected to rise by a more modest 9 per cent.
Botswana’s current account balance for 2014 was
estimated as a surplus of 12.4 per cent of GDP, up from
10.4 per cent in 2013 (EIU 2014a). This surplus was
supported by revenue from diamond exports as a result
of a continuous recovery in global diamond demand,
and by current transfer receipts. However, attaining
the predicted surplus will also depend on the level of
electricity imports.
2.1.2 Lesotho
Lesotho’s economy grew by 3.4 per cent in 2013 and
is projected to average 5 per cent growth by 2015.
GDP growth was driven by large-scale investments in
construction activities and a strong recovery in private
sector services such as textile and clothing, transport
and communications, and financial intermediation
(IMF 2014b).
Lesotho’s inflation rate was 4.9 per cent in 2013,
supported by moderate increases in food prices and
lower global oil prices. Inflation was predicted to rise
to 5.5 per cent in 2014 as a result of a weaker South
African rand and higher inflation in South Africa, the
main source of most of Lesotho’s imports, which were
expected to push up Lesotho’s import costs (EIU 2014b).
Despite a target fiscal surplus of 4.2 per cent of GDP,
Lesotho managed to record a surplus of only around 1
percentin2013–14.Thislowerfigureresultedfroma15
per cent undershoot on tax collection, heavy recurrent
spending and the challenge of maintaining fiscal
equilibrium over the medium term. The fiscal balance
was projected to move into deficit in 2014–15 to the
tune of 1.6 per cent of GDP, as spending continued to
expand (EIU 2014b).
Lesotho’s current account balance registered a deficit
of 11.3 per cent of GDP in 2013, driven by a 16 per
cent reduction in exports and a 21 per cent decrease in
food imports. Imports were projected to rise in 2014
and 2015 because of the start of construction activities
associated with the Lesotho Highlands Water Project.
These were predicted to increase the current account
deficit to 23.6 per cent in 2015 (EIU 2014b).
2.1.3 Mauritius
Growth was estimated at 3.3 per cent in 2013 and
was characterised by muted domestic investment and
weak external demand (AfDB 2014a) as Europe, which
accounts for nearly two-thirds of Mauritius’s exports,
recorded a small economic growth of 0.5 per cent in
2013. Growth was forecast to reach 3.4 per cent in 2014,
driven by efforts to diversify Mauritius’s economy,
exposing it to emerging markets and to the further
expansion of the Euro economic zone (EIU 2014c).
It was projected that increased domestic production,
loose monetary policy and rising prices for locally
produced foods would cause inflation to rise from an
20
32. average of 3.5 per cent in 2013 to 3.9 per cent in 2014
(EIU 2014c).
Revenue was forecast to reach 21.7 per cent of GDP in
2014, driven by revenue growth in Mauritius trade and
investment (EIU 2014c). Expenditure was set to rise
from 24.8 per cent of GDP in 2013 to a peak of 25.7 per
cent of GDP in 2015 as election-related spending rises.
The current account deficit was predicted to narrow
from 9.9 per cent of GDP in 2013 to 8.6 per cent of
GDP in 2014 thanks to improved performance on
trade and services accounts and the exchange rate
(EIU 2014c).
2.1.4 Namibia
Real GDP growth was estimated at 4.4 per cent (Bank
of Namibia 2014) in 2013. The Namibian economy was
estimated to expand by 5.4 per cent in 2014. The growth
was to be underpinned by strong construction activity
in several mines, which is expected to boost mineral
exports in the medium term. Moreover, secondary
industries were projected to grow as a result of a public
housing construction programme undertaken by the
government (Bank of Namibia 2014).
Namibia’s inflation was estimated to average around 5.6
per cent in 2014 (EIU 2014d). This figure will remain
influenced by South African inflation trends because
the bulk of Namibian imports continue to be sourced
from South Africa. Namibian inflation will also remain
vulnerable to any shocks to global food prices.
At the end of 2013–14, the government’s fiscal position
remained strong, although a 3.0 per cent GDP deficit
was recorded compared with the balanced budget in
2012–13. This deficit resulted from an increase in
total government debt, reflected in both the domestic
and external debt stocks (EIU, 2014d). Because of a
predicted underspend on the development budget,
the Economist Intelligence Unit (EIU) forecast a fiscal
deficit of 5.2 per cent of GDP in 2014–15.
Namibia registered a larger deficit in the current
account, mainly owing to increased trade deficit
balance and net outflows in services during the first
quarter of 2014. The trade deficit was due to a 21.6 per
cent quarterly increase in import bills for machinery
and mechanical appliances, vehicle parts, and prepared
foods and beverages. At the same time, the value of
exports declined by 11.1 per cent because trade volumes
of uranium and diamonds decreased (EIU 2014d).
2.1.5 Seychelles
The real GDP growth was estimated at 5.3 per cent,
supported by a 10 per cent increase in the tourism
industry in 2013. However, this growth was estimated
to slow to 3.7 per cent in 2014 because of lower
European fish quotas and tourism growth slowing, as
well as tighter monetary policy (EIU 2014e).
Annual inflation in 2013 reached an average of 4.3
per cent because of a strong currency driven by lower
imported commodity prices. Inflation was predicted
to reach 2.3 per cent in 2014 as currency and external
price trends continued on the same trajectory.
Strict spending controls produced an estimated
budget surplus of 1.7 per cent in 2013. The budget
was estimated to remain the same in 2014–15 despite
increased spending on much-needed infrastructure.
However, better expenditure management and ongoing
reform of parastatal enterprise will reduce the fiscal
pressures (EIU 2014e).
The current account deficit was estimated at 16.6 per
centofGDPin2013,drivenbystrongcapitalinvestment
and consumer demand that boosted imports. The
current account deficit was forecast to widen in 2014
to 22.6 per cent of GDP as a result of projected strong
domestic energy import demand.
2.1.6 Swaziland
Economic growth in Swaziland was estimated to
weaken to just over 2.2 per cent in 2014, down from
the estimated 2.8 per cent in 2013. This deceleration
is largely the result of weaker performance in the
manufacturing sector (EIU 2014f).
Inflation was estimated to rise to an average of 5.8 per
cent (EIU 2014f) in 2014 from 4.4 per cent (AfDB
2014b) in 2013. This increase is driven by higher
electricity tariffs and an increase in domestic fuel prices
and transport fares.
The budget deficit in the 2013–14 fiscal year amounted
to 0.2 per cent of GDP. The EIU projected that the
budget shortfall would widen to 3.1 per cent in 2014 in
an attempt to spur economic growth.
Because export earnings increased by an estimated
15.7 per cent in US dollar terms in 2013, helped by
rising sugar and mineral production, Swaziland
recorded a current account surplus of 8.3 per cent
of GDP in 2013. Revenue was expected to expand
further in 2014 as a result of higher export volumes.
However, in 2015 an expected drop in clothing
exports to the USA will lead to a decline in overall
exports. The current account was estimated to move
into deficit by 2015 to the tune of 2 per cent of GDP
(EIU 2014f).
Country Analysis 21
33. 2.2 Asia-Pacific small states
2.2.1 Brunei Darussalam
Thanks to its extensive resources of oil and gas and its
small population, Brunei Darussalam is among the
world’s richer countries. Its economy is heavily reliant
on the oil and gas sectors, making it vulnerable to any
changes within the sector.
The non-energy sector grew by 2.7 per cent in
2013. However, overall, real GDP contracted by an
estimated 1.8 per cent in 2013, because the energy
sector contracted by an estimated 7.2 per cent. This
decrease was due to ongoing maintenance of some
of the hydrocarbon facilities. The IMF predicted that
the economy would rebound in 2014, and forecast a
growth rate of 5.3 per cent (IMF 2014c,d).
Brunei Darussalam still experienced a positive trade
balance, owing to the large value and volume of gas and
oil exports, totalling 95 per cent of total exports and
over 60 per cent of GDP.
Government policy remains focused on diversifying
the economy and boosting private-sector growth,
while also improving human capital and employment
opportunities.
2.2.2 Fiji
The Fijian economy grew by 3.6 per cent in 2013
thanks to better performance in the agriculture and
mining sectors, and recovery from severe flooding
at the start of 2012 (ADB 2014a). Similarly, the
economy was projected to grow by 3.8 per cent in
2014. The growth was expected to be mainly driven
by the following sectors: construction; manufacturing;
wholesale and retail trade; financial intermediation;
transport and storage; agriculture; and information
and communication (Reserve Bank of Fiji 2014).
Fiji’s inflation rate was predicted to remain at 3.0 per
cent in 2014 as projected declines in international food
and fuel prices were offset by continued fiscal expansion
(ADB 2014b). Government expenditures were set to
further increase by 28 per cent in the 2014 budget as both
recurrent and capital expenditure increased. A 1.9 per
cent budget deficit was forecast for 2014 (ADB 2014b).
The current account deficit was estimated to narrow to
6.1 per cent of GDP in 2014 as tourism earnings and
personal remittances rose (ADB 2014b).
2.2.3 Kiribati
The growth of Kiribati’s economy slowed to 2.0 per
cent in 2013 from 2.5 per cent in 2012. This decline
was due to a delay in construction projects. However,
the economy was projected to grow by 3.0 per cent in
2014 and 2.0 per cent in 2015 as construction picked
up on projects funded by development partners
(ADB 2014c).
Inflation was projected to remain at 2.5 per cent in
Kiribati in 2014. The government planned higher
recurrent expenditures, to be financed in part by the
continuing strength of fishing licence revenues, budget
support grants and higher capital spending associated
with ongoing infrastructure projects (ADB 2014c).
2.2.4 Maldives
The Maldivian economy grew by 3.7 per cent in 2013,
driven by a strong rebound in the tourism sector and
associatedsectors,suchastransportandcommunication.
This expansion was predicted to continue, with 4.5 per
cent growth in 2014 and 5.4 per cent in 2015, driven by
a strong tourism sector (ADB 2014d).
Inflation reached 4.0 per cent in 2013, its lowest level
since 2006. This drop was as a result of a decrease in
the price of fish in 2013 as the catch improved. The rate
of inflation was estimated to increase slightly to 5.0 per
cent in 2014 as the economy continued to expand by
relying heavily on imports (ADB 2014d).
Maldives’ current account deficit narrowed to 20.5 per
cent of GDP in 2013 from 23.0 per cent a year earlier,
thanks to higher tourism receipts, improved re-export
of jet fuel and reduced net income outflows (ADB
2014d). However, the Asian Development Bank (ADB)
forecasted a current account deficit of 21.8 per cent of
GDP in 2014 as increased tourism pushes imports and
other payments higher.
The fiscal deficit for 2013 was 4.7 per cent of GDP.
Revenuecollectionremainedrobust,reaching33percent
of GDP, driven by higher than expected receipts from tax
revenues, which offset the shortfall in non-tax revenue.
Meanwhile, total expenditure grew marginally, by 2 per
cent, and rose to 38 per cent of GDP in 2013 (Maldives
Monetary Authority 2013). The ADB predicted that the
budget deficit would expand in 2014. However, Maldives
envisioned a 22.6 per cent expansion in budget spending
and a 30 per cent increase in budget revenues, which
could potentially reduce the budget deficit to 3.2 per cent
of GDP (ADB 2014d).
2.2.5 Nauru
Nauru’s economy expanded by 4.5 per cent in 2013,
driven by Australian-financed construction related
to the expansion of the Regional Processing Centre
(RPC). Infrastructure upgrades in the small island
economies of the Pacific are expected to drive growth
22 Small States: Economic Review and Basic Statistics
34. in 2015 and 2016. Nauru’s growth was at 10 per cent in
2014 (ADB 2015).
Inflation was forecast at 5 per cent in 2014 and is set
to increase to 7.0 per cent in 2015. These inflation
levels will be driven by price increases caused by robust
economic activity and the introduction of a A$6,000
business visa fee (ADB 2014c).
Revenues from fishing licence fees continue to
contribute towards Nauru’s budget. These have
exceeded the 2013 budget projection by 4 per cent.
Moreover, higher income from visa fees and customs
duty attributable to the RPC has boosted Nauru’s
fiscal position. The country’s 2014 budget reflects a
continuation of recent large increases in spending.
It was projected that spending would exceed A$96
million in 2014, which is more than three times the
amount spent in 2011 (ADB 2014c).
2.2.6 Papua New Guinea
Papua New Guinea’s economic growth fell to 5.1 per
cent in 2013 from 8.0 per cent in 2012. This reduction
was a result of a decline in the expansion of the
construction sector from 24 per cent in 2012 to 12 per
cent in 2013; the decline spilled over into the broader
economy. Growth was forecast at 6.0 per cent in 2014,
led by the commencement of gas exports in late 2014
(ADB 2014e).
Inflation remained moderate in 2013, with the
consumer price index estimated to have risen by 4
per cent at year-end because of subdued international
food and commodity prices and low inflation in key
trading partners. It was expected that inflation would
accelerate to 6.5 per cent in 2014, as public investments
originally planned for 2013 finally rolled out and as
the kina’s depreciation in late 2013 passed through to
import prices (ADB 2014e).
The current account recorded a deficit of 13.7 per
cent of GDP in 2013, driven by large capital imports
and service payments related to the liquefied natural
gas (LNG) project construction. The current account
deficit was predicted to narrow to 7.0 per cent of GDP
in 2014. This improvement was expected to be driven
by the commencement of LNG exports in late 2014 and
by nickel production at a new mine (ADB 2014e).
2.2.7 Samoa
The Samoan economy contracted by 0.5 per cent
in 2013. This reduction was due to the devastation
caused by Tropical Cyclone Evan in December 2012.
The cyclone damaged public infrastructure and badly
affected tourism and agriculture. The economy was
thought to expand by an estimated 2.0 per cent in
2014 as post-cyclone reconstruction and rehabilitation
continued and tourism bounced back following the
reopening of a key resort in Apia and the opening of
two new resorts in late 2013. High domestic demand,
increased fish exports and agriculture also drove
growth in 2014 (ADB 2014f).
Inflation in Samoa was 6 per cent in 2013 because of
a decline in international food and fuel prices and the
replanting and recovery of supply networks. Inflation
was 2 per cent in 2014 because of the high price for
local agricultural produce (ADB 2014f).
Samoa’s current account deficit widened to 13.4
per cent of GDP in 2013 from 11.1 per cent in 2012
mainly as a result of an increase in merchandise trade
deficit combined with reduced inflows for services
income. The current account deficit widened further to
16.2 per cent of GDP in 2014 because of imports for
reconstruction (ADB 2014f).
2.2.8 Solomon Islands
Growth in the Solomon Islands slowed to 2.9 per cent
in 2013 because of a decline in earnings from gold and
agriculture. Economic growth was predicted to pick up
slightly to 3.0 per cent in 2014 as gold mining scaled
up and agriculture continued to recover (ADB 2014g).
Inflation averaged 6.0 per cent in 2013 because heavy
rains drove up food prices. It was estimated to reach
an average annual rate of 5.5 per cent in 2014 as the
impact of the poor weather dissipated (ADB 2014g).
The Solomon Islands’ overall budget deficit for 2013
was 0.7 per cent of GDP. They estimated a balanced
budget in 2014 but this depended on stronger economic
growth and improvements in revenue administration
and compliance (ADB 2014g).
The current account deficit was estimated at 2.0 per
cent in 2013 as export earnings from gold, logging and
agricultural commodities fell and imports increased to
support major investment projects. In 2014, the current
account deficit was forecast to widen to 6.0 per cent of
GDP. This increase was to be driven by a decline in
logging exports and increased imports of construction
and mining equipment (ADB 2014g).
2.2.9 Tonga
According to the IMF, growth in Tonga was 0.1 per
cent in 2013. However, the economy was expected to
grow 1.5 per cent in 2014, driven by an upgrade of the
airport runway, reconstruction activities in response to
the damage caused by Tropical Cyclone Ian, which hit
Country Analysis 23
35. Tonga in January 2014, and remittances in response to
lost livelihoods (ADB 2014f).
Inflationwas2.3percentin2013becauseofinternational
price movements and the appreciation of the pa’anga
against Tonga’s main trading partners, which reduced
the cost of imports. Inflation was forecast to narrow to
2.0 per cent in 2014, driven by construction projects
and continuing economic recovery following Tropical
Cyclone Ian (ADB 2014f).
Tonga recorded a budget deficit of 4.9 per cent of GDP
in 2013, largely because of supplementary funds needed
to purchase land for airport development (ADB 2014f).
The budget was predicted to record a small deficit in
2014, estimated at around 0.6–0.7 per cent of GDP, due
to funding from donor agencies (IMF 2014e).
Tonga’s current account deficit reduced to 5.9 per cent
of GDP in 2013, from 6.9 per cent in 2012, as a result of
an increase in remittances. The current account deficit
was forecast to decrease to 3.7 per cent of GDP in 2014
because of a predicted increase in the country’s growth
and remittance inflows (ADB 2014f).
2.2.10 Tuvalu
Tuvalu’s economic growth rose from 0.2 per cent in
2012 to 1.1 per cent in 2013 as a result of upgrading
its airport, increased fishing licence revenues and
retail activity. These factors are expected to continue
promoting economic growth, which was forecast to
reach 2.0 per cent in 2014 (ADB 2014c).
Inflation was projected to accelerate to 2.5 per cent
as growth picked up in 2014, in line with increases in
international food and fuel prices (ADB 2014c).
Tuvalu had a current account surplus of 3.5 per cent of
GDP in 2013, supported by inflows of fishing revenue
and official development assistance. For 2014, the
current account deficit was forecast at 9.6 per cent of
GDP. Tuvalu planned higher recurrent expenditures
throughout2014,tobefinancedinpartbythecontinuing
strength of fishing licence revenues and budget support
grants, and higher capital spending associated with
ongoing infrastructure projects (ADB 2014c).
2.2.11 Vanuatu
Real GDP growth in Vanuatu increased from 1.8 per
cent in 2012 to 3.2 per cent in 2013. This growth was
driven by tourism as the number of tourist arrivals
rose throughout the year. After declining in 2012,
the recovery of agricultural production has also
contributed to the economy’s growth. Growth was
estimated to reach 3.5 per cent in 2014, supported
mostlybyincreasedconstructionspendingandtourism
as both the Australian and New Zealand economies
strengthened (ADB 2014f).
Inflation averaged 1.4 per cent in 2013 as higher
domestic demand related to increased economic activity
offset lower international food and fuel prices. Vanuatu’s
inflation was predicted to accelerate to 2.5 per cent in
2014, driven by construction projects and continuous
strengthening of the economy (ADB 2014f).
Vanuatu recorded a small fiscal surplus equivalent to
0.3 per cent of GDP in 2013 as a result of improving
its monitoring of VAT receipts. This improved per
formance led to increasing its revenues by 10 per cent
in 2013 (ADB 2014f).
Vanuatu’s current account deficit was estimated at 6.2
per cent of GDP in 2013, compared with 6.4 per cent in
2012.ThedeficitwasimprovedbyFDIanddevelopment
inflows. These improvements were likely to continue
throughout 2014, leading the current account deficit to
dip to an estimated 6.0 per cent in 2014 (ADB 2014f).
2.3 European small states
2.3.1 Cyprus
Real GDP fell by 5.4 per cent in 2013 compared with a
decline of 2.4 per cent in 2012 (Central Bank of Cyprus
2013). This decline was a result of high macroeconomic
uncertainty, large shocks to income and wealth,
and ongoing fiscal consolidation, which depressed
consumption and investment (IMF 2014f). Further
contraction of up to 3.4 per cent was estimated in 2014
as wages fell, unemployment remained high and the
banks were forced to tackle non-performing loans in
order to survive (EIU 2014g). Cyprus’s economy is
estimated to record an average growth of 1.5 per cent in
2015 and 2016, mainly driven by net exports supported
by improved competitiveness and a gradual increase in
global demand (European Commission 2014a).
Consumer prices deflated by 0.4 per cent in 2013 as
demand plummeted. Inflation close to zero was forecast
for 2014 as unemployment was predicted to average
16.2 per cent. However, unemployment is projected
to decline gradually as the economy returns to growth
in 2015–16. Subsequently, inflation will also increase
modestly (European Commission 2014a).
The general government budget deficit in Cyprus
was 5.4 per cent of GDP in 2013 (EIU 2014g).
Improvementsareexpectedasrevenuesincrease,driven
by consolidation measures on social contributions and
taxes on production and imports, high dividends from
the Central Bank of Cyprus and improved tax collection
(European Commission 2014a). A projected return to
24 Small States: Economic Review and Basic Statistics
36. growth in 2015, coupled with austerity measures, will
provide funds to cover spending on unemployment
benefits and early retirement and hence reduce the
fiscal deficit to just under 4.0 per cent of GDP in 2015
(EIU 2014g). The government debt-to-GDP ratio was
111.7 per cent in 2013 (EIU 2014g) and is forecast to
reach about 115 per cent before falling again thanks to
economic recovery and improved fiscal performance
(European Commission 2014a).
The current account deficit was estimated to widen in
2014 to 5.1 per cent of GDP as a result of high imports
of goods and services because of an improved domestic
demand outlook. The deficit is estimated to be stable
during 2015–16 (EIU 2014g) as Cyprus’s economy
returns to growth thanks to tourism (European
Commission 2014a).
2.3.2 Malta
Real GDP in Malta stood at 2.9 per cent in 2013 (EIU
2014h) and was projected to reach 3 per cent in 2014
and 2.9 per cent in 2015. Large-scale energy projects
were expected to be a major driver of growth in 2014–
15 (European Commission 2014b).
Inflation averaged 1.4 per cent in 2013, down from 2.4
per cent in 2012, as a result of lower global food and
energy prices and subdued domestic demand (EIU
2014h). However, inflation was projected to average 0.7
per cent in 2014 and then gradually increase to 2 per
cent in 2016, driven mainly by stabilisation in energy
prices and a normalisation in food price inflation
(European Commission 2014b).
Malta recorded a worse than predicted fiscal deficit of
2.8 per cent of GDP in 2013 (EIU 2014h). However,
the deficit was estimated to improve marginally in
2014, to 2.5 per cent of GDP. The improvements were
expected to be supported by an increase in current
revenues thanks to the favourable macroeconomic
outlook as well as the revenue measures announced
in the 2014 budget (European Commission 2014b).
The deficit is estimated to increase to 2.6 per cent of
GDP in 2015 because of a capital injection into Air
Malta and then decline to 2.0 per cent of GDP in 2016
thanks to a favourable growth outlook and the end of
public support to Air Malta. Interestingly, the general
government debt-to-GDP ratio increased to 69.8 per
cent in 2013 (European Commission 2014b) and it was
projected to peak at 75.3 per cent in 2014, easing to
72.3 per cent in 2016 (EIU 2014h).
Malta’s current account recorded a surplus of 0.9 per
cent of GDP in 2013 but it was expected to decline
to 0.6 per cent of GDP in 2014. During 2015–16, the
surplus is projected to rise again to an average of 0.9
per cent of GDP (EIU 2014h). Among the driving
factors for the oscillation of the Maltese current
account are the geopolitical tensions which prompted
rounds of sanctions between the EU and Russia in
late July and August 2014. This situation could affect
Malta’s exports, as Russia accounts for 1.9 per cent of
Malta’s total exports. However, a continued increase in
activity in Europe and the USA, and steady demand
from major Asian economies, should offer support to
Malta’s exports of manufactures (EIU 2014h).
2.4 Caribbean small states
2.4.1 Antigua and Barbuda
Tourism in Antigua and Barbuda remains the main
generator of employment and accounts for over 50 per
cent of GDP both directly and indirectly. The industry
has been affected by the global recession, with the
number of international arrivals falling between 2008
and 2009. The IMF (2013a) notes that, during the
crisis, the strong decline in tourism source markets, a
contraction in government services and weakness in
the local banking sector played a part in a severe decline
in real output. It argues that Antigua and Barbuda has
also lost competitiveness in the tourism industry, while
real expenditure per tourist has declined. Nonetheless,
in recent years, numbers have steadily increased once
more and in 2012 they were close to prerecession levels.
The GDP for 2013 stood at US$1.23 billion and annual
GDP growth at 1 per cent for the year. Growth in 2014
was forecast at 2 per cent, with tourism continuing
to recover, although government arrears could slow
growth in some sectors of the economy and undermine
confidence. According to the IMF (2013a), Antigua and
Barbuda’s projected trade balance for 2013 was –37.5
per cent of GDP. Inflation in July 2013 stood at 1.7 per
cent, which is a drop of 1.8 per cent from the rate of 3.5
per cent recorded in July 2012. The government’s fiscal
position deteriorated under the expansionary stance
in the run-up to the elections. For the first six months
of 2014, spending was up 6.6 per cent compared with
the same period in 2013, while tax revenues grew by
3.4 per cent. In the 12-month period July 2013 to June
2014, the primary deficit widened to 1.3 per cent of
GDP compared with a surplus of about 0.6 per cent of
GDP for July 2012 to June 2013 (IMF 2014g).
2.4.2 The Bahamas
The EIU’s 2014 report (EIU 2014i) lists The Bahamas’
current GDP at US$8.4 billion for 2013, compared with
US$8.2 billion for 2012, resulting in a real GDP annual
growth of 0.7 per cent. The IMF (2014h) argues that
growth has been tentative, and while investment has
Country Analysis 25
37. improved by 20.6 per cent, as a result of the US$3.5
billion Baha Mar tourist resort, this accounts for a
small percentage of overall growth. Tourism receipts,
which account for a substantial proportion of exports,
declined in late 2012 and early 2013, in part because
of Hurricane Sandy. The hurricane’s estimated damage,
in this time frame, is US$300–400 million, which
represents 3.7–4.9 per cent of GDP (Kunz et al. 2013).
Although historically The Bahamas are badly affected
by tropical storms or hurricanes only intermittently,
the government signed a grant agreement with
the Caribbean Catastrophe Risk Insurance Facility
(CCRIF) for US$85,000 to fund two projects designed
to strengthen damaged coastal defences (CCRIF 2013).
The IMF projected the estimated trade balance for 2013
at –28.7 per cent of GDP. However, inflation has been
forecast to rise to 1.8 per cent as price rises remain
unchanged but base year effects push inflation higher.
The introduction of VAT in 2015 caused inflation to
rise to 2.2 per cent in January as VAT counteracted the
effects of falling oil prices (IMF 2015). Preliminary IMF
data indicate that the fiscal deficit declined in 2013 to 4.5
per cent of GDP from 5.4 per cent in the previous year.
Additionally, they have predicted that the introduction
of VAT may cause the deficit to narrow further to slightly
less than 4 per cent of GDP in the 2014–15 fiscal year.
2.4.3 Barbados
The IMF notes that Barbados’s economic activity is
highly dependent on tourism and offshore businesses
(IMF 2014i). However, the 2008 financial crisis badly
affected Barbados’s economy, which has contracted,
on average, at 0.6 per cent each year since then. Its
economic performance, dependent on the tourism
sector, has been affected by the declining number
of tourists from the UK since 2009. The Barbados
Statistical Service (2014) noted that the rate of inflation
fluctuated over 2014 from 1.82 per cent in January to
1.69 per cent in September before ending the year at
1.89 per cent.
Real GDP for 2013 was US$4.2 billion, which represents
0.2 per cent growth from 2012. The government’s debt
increased from 85.7 per cent of GDP in 2012 to 97.6 per
cent in 2013. Similarly, the fiscal deficit increased to 12.3
per cent of GDP in 2013 and the trade deficit for the first
quarter of 2014 was Bds300 million (EIU 2014j). The
IMF estimated low growth for 2014 with a large fiscal
deficit and high debt burden for the Barbadian economy.
However, some fiscal consolidation has taken place in the
light of these events – namely layoffs, spending cuts and
increased taxation – which, when coupled with the loss
of revenue from a weak economy, will lead to a reduction
in the fiscal deficit of approximately 7 per cent.
2.4.4 Belize
Belize’s real GDP growth dropped to 0.7 per cent in
2013 from 4 per cent in 2012 as a result of declines in oil
production and fragile output in agricultural products.
In the medium term, GDP growth is predicted to reach
2.5 per cent as faltering oil production is boosted by
other sectors (i.e. tourism, construction and other
commodity exports). Similarly, the fiscal deficit stood
at 1.1 per cent of GDP between January and December
2013, with national accounts showing GDP shrinking
by 0.4 per cent in the first quarter of 2014, in part
because of adverse weather (IMF, 2014j).
However, dry weather in 2014 allowed the sugar industry
to recover somewhat, with an extended harvest season.
Belize’s main economic driver since the 1990s has been
theservicesector,whichcontributesaround60percentof
GDP. Interestingly, although it accounts for no more than
10 per cent of GDP, the agricultural sector is responsible
for over 50 per cent of exports, particularly the citrus and
sugar industries. Climatologists have forecast that the
presence of El Niño – a weather phenomenon related to
warming sea surface temperatures in the Pacific Ocean –
in late 2014 could jeopardise agricultural markets and,
potentially, incomes. The full extent of the potential
damage is unclear but the EIU (2014k) believes it is likely
to be a minor episode and has revised its commodity
production predictions accordingly.
2.4.5 Dominica
Dominica’s GDP for 2013, according to the World Bank
(2015), was approximately US$516 million. GDP growth
fell by 1 per cent, continuing the decline seen in 2012.
The IMF (2013b) notes that Dominica is less reliant
on tourism than other East Caribbean countries, and a
higher proportion of its GDP is provided by agriculture
than in its counterparts. Within tourism, the main
componentiscruiseshipvisitors,whichislessprofitable
for the country than stay-over tourism. Between 2008
and 2012, Dominica faced a range of natural disasters
including Hurricanes Dean and Omar as well as severe
flooding that damaged roads and bridges. Any further
severe weather in the future could continue to take its
toll on infrastructure and cause debt to increase as the
government borrows from emergency disaster funding.
2.4.6 Grenada
After almost four years of decline, real GDP grew in
2013 by 1.5 per cent. This increase was attributed to
a resort construction project and a spike in enrolment
at a Grenadian offshore medical school. Other sectors
such as tourism did not fare as well. Tourism was badly
26 Small States: Economic Review and Basic Statistics
38. affected by the hurricane of 2004 which devastated
the country, causing damage totalling approximately
150 per cent of GDP. More recently, an increase in the
UK’s air passenger duty has dampened UK arrivals,
which constitute a large percentage of tourists to
Grenada. However, exports of goods have improved as
the production of Grenada’s primary export, nutmeg,
has increased, after the majority of trees were wiped
out by the 2004 hurricane. The fishing industry is also
performing well (IMF 2014k).
The IMF (2014k) has predicted that inflation will
remain at 2 per cent in the medium term. The trade
balance was estimated at –27.3 per cent of GDP in 2013
and was predicted to drop to –23.8 per cent in 2014.
2.4.7 Guyana
The Guyanese Central Bank’s report (Bank of Guyana
2013) notes that in 2013 the Guyanese economy saw
an increase in real economic activity of 5.2 per cent.
This growth was fuelled by increases in all of the major
industries, namely agriculture, mining, services and
manufacturing. The main boost to GDP came from the
services industry, particularly activities in the financial
and insurance sectors, wholesale and retail trade, and
construction, which accounted for over 60 per cent of
GDP.
Inflation was estimated to increase by 0.4 per cent in
2014 compared with the 0.57 per cent decline seen in
2013 (Bank of Guyana 2014). Food and fuel prices were
predicted to increase moderately. Balance of payments
for the first quarter of 2014 stood at a deficit of US$70.3
million, which is a 33.1 per cent increase from the same
periodin2013,whenthedeficitwasUS$52.8million.This
growth was attributed to a lower capital account surplus
and lower unrequited transfers by the Central Bank.
Furthermore, Guyana is benefiting from more favourable
growth as a result of buoyant commodity prices.
2.4.8 Jamaica
The Central Bank of Jamaica’s 2013 annual report (Bank
of Jamaica 2013) noted that there was marginal GDP
growth of 0.2 per cent. The weak domestic demands
conditions seen in 2012 had continued. Despite this
sluggish growth, the IMF (2014l) reports that a gradual
economic recovery from the adverse effects of the
global recession has begun. It was estimated that the
economy grew by 1.6 per cent year on year in the first
quarter of 2014. Over 2013–14 as a whole, growth was
slightly lower, at 0.9 per cent, because of improvements
in the mining, agriculture and tourism industries.
The inflation prediction for 2014–15 has been lowered
to 8 per cent. Additionally, the EIU (2014l) reports that
the Jamaican government achieved a fiscal surplus of
0.1 per cent of GDP for 2013–14 and had a primary
surplus of 7.6 per cent of GDP, exceeding estimates. In
terms of debt, the Central Bank noted that Jamaica’s
total stock of debt grew by 6.9 per cent to J$1,938.2
billion for April to December 2013 compared with 6
per cent for the same time frame in the previous year.
The balance of payments also improved from 2012,
with a decrease in the current account deficit from
12.9 per cent of GDP to 11 per cent for 2013. However,
the performance of exports in 2013 saw reductions
in major traditional exports (such as sugar, which fell
40.3 per cent) and non-traditional exports (such as
ethanol, which dropped by 19.3 per cent) as a result of
unfavourable market conditions.
2.4.9 St Kitts and Nevis
The IMF (2014m) reports that real GDP, which declined
cumulatively by 10 per cent between 2009 and 2012, is
estimated to have grown by 1.7 per cent in 2013. It was
set to accelerate to 2.7 per cent in 2014, supported by
the recovering tourism industry and the construction
sector. The government placed a great deal of emphasis
on improving the GDP contribution of tourism, the
main industry of the economy, by investing in upgrades
to hotels and improvements to airlift capacity. The
strategy appears to be working, as stay-over tourists are
predicted to spend a lot and boost the economy.
In addition, inflation stood at –0.1 per cent in March
2014 year on year, indicating that economic recovery
has picked up since 2013. The total public debt as a
percentage of GDP decreased in the first quarter of
2014 to 91.2 per cent from 104.9 per cent for the same
period in 2013 (IMF 2014n).
2.4.10 St Lucia
The World Bank reported that St Lucia’s annual GDP
growth fell by 0.4 per cent in 2013 (World Bank 2014).
The inflation rate for consumer prices was estimated at
5.3 per cent for 2013 because of the VAT-related steep
increase in prices. However, the IMF (2013c) forecast
that price increases should return to around 3 per cent
after the fourth quarter. It also noted that, between
2009 and 2012, St Lucia avoided a recession during the
global economic crisis. Nonetheless, the country still
suffered from weak growth, which it countered with
strong economic policies. However, as a result, the
overall fiscal deficit widened to 12 per cent of GDP by
the end of 2012 and public debt, similarly, increased to
78 per cent of GDP.
In terms of tourism, St Lucia’s main industry, the total
number of visitors has gradually increased since 2012.
Country Analysis 27
39. For 2013, 960,617 visitors were recorded, which is a 3 per
cent increase on the previous year. Although the number
of visitors overall has increased, in the subcategory of
cruise ship calls there has been a steady decline, falling
from 397 in 2009 to 344 in 2013 (ECCB 2014).
2.4.11 St Vincent and the Grenadines
StVincentandtheGrenadineshasexperiencedextreme
weather in the last decade. Five major events since 2010
have caused damage costing more than EC$600 million
or approximately one-third of the country’s GDP. These
events included landslides and flooding in 2011 and
Hurricane Tomas in 2010. A regional climate centre
is due to be established in the Caribbean, designed to
help understand and better predict climate impact,
but more extreme weather remains a real risk for the
country (Brown 2014).
The IMF (2014o) reports that, after three years of
decline which started with the 2008 recession, St
Vincent and the Grenadines is gradually recovering.
Its main economic drivers – tourism, remittances and
FDI – all suffered as a result of the global recession
and the extreme weather events mentioned above.
The 2011 real GDP growth rate was 0.4 per cent. This
rate increased to 1.5 per cent in 2012 and 2 per cent in
2013 and is estimated to be 1.1 per cent for 2014 as a
result of increased work in different sectors including
construction, manufacturing and education (IMF
2014p). At the end of 2013, the government had a
public debt burden that was 67 per cent of GDP. This
figure represents an increase from the IMF’s growth
estimates of 57.6 per cent and 58.4 per cent of GDP
in 2011 and 2012 respectively. Inflation fell to 0.3 per
cent at the end of October 2011 but was estimated to
have increased to 2.5 per cent in 2013 as international
commodity prices stabilised.
2.4.12 Trinidad and Tobago
Trinidad and Tobago’s central bank (2014) reports
that real GDP grew by 2.1 per cent year on year in the
fourth quarter of 2013. This rate indicates a recovery
from the 0.4 per cent decline noted in the third quarter
of 2013. Overall, the EIU (EIU 2014m) notes that GDP
growth achieved a five-year high of 1.6 per cent in 2013.
Furthermore, demand is strengthening, highlighted by
the improvement of construction indicators.
Although Trinidad and Tobago is an energy exporter,
the country’s economic activity in 2013 was boosted
mostly by the non-energy sector, in particular financial
services (IMF 2014q). However, this trend was reversed
in the last quarter of 2013 as activity in the energy
sector increased by 2.4 per cent, while growth in the
non-energy sector stood at 1.9 per cent in total. Core
inflation in April 2014 was 2.6 per cent, which is a
decline from the previous month’s record of 2.5 per cent.
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28 Small States: Economic Review and Basic Statistics
