Economic Analysis - Growth Outlook Improving On The Back Of Tourism Development - MAY 2017

BMI View: Although Kiribati's tourism sector has struggled to take off over the past three decades, we believe that the industry could be tapped to become the lifeline of the economy. The government has recognised the sector's potential to facilitate sustainable growth and we expect it to continue taking positive steps to concretise its development plans. Accordingly, we have upgraded our real GDP forecast for the island nation to average 2.0% per annum over the coming decade, from 1.2% previously.

Kiribati is one of the poorest countries in the Asia Pacific region with an estimated per capita income of just around USD1,400 (as of 2016), similar to countries like Pakistan and Nepal. Real GDP growth in the nation averaged just 1.5% per year over the last 25 years, which is much lower than the average annual growth rate of 5.0% for similar countries in the World Bank's lower middle income category. Although the tourism sector has struggled to take off over the last 30 odd years - since its independence from the British in 1979 - due to multiple constraints, but mainly caused by a lack of investment, we believe that the industry could potentially be developed into a lifeline for the economy. To this end, the government of President Taneti Maamau has outlined measures in its medium-term development plan for 2016-2019 to boost its tourism sector through more infrastructure investment, and we expect the administration to continue taking concrete steps to realise its objectives. Accordingly, we have upgraded our forecast for real GDP growth in Kiribati to average 2.0% over the coming decade for now, up from 1.2% previously.

Challenges Abound, But Poor Business Environment Is A Chief Concern

Long-Term Growth Outlook Improving Slightly
Kiribati - Real GDP Growth, %

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