Economic Analysis - Loss Of LDC Status Could Weigh On LT Growth Prospects - MAY 2018

BMI View: Kiribati was recommended for graduation from the LDC category by the UNCDP at its triennial review in March. Along with the advancement, the island-nation will likely lose some ODA and preferential trade access. Although we believe that the impact on current income levels will likely be minimal, risks to the long-term growth outlook are weighted to the downside.

The United Nations' Committee for Development Policy (UNCDP) has recommended Kiribati, together with three other nations (Bhutan, Sao Tome and Principe and the Solomon Islands), for graduation from the least developed country (LDC) category at its 2018 triennial review in March, from a list of 47 nations. This is a recognition of the progress that these four countries have made with regards to improving their access to healthcare and education, as well as the growth in income levels, and is significant as only five countries have advanced out of the grouping since it was established 47 years ago. Although moving from the list of LDCs is a positive step in terms of development, and will likely lead to improved foreign investor confidence, Kiribati may lose some foreign assistance and preferential treatment for exports. Given that the country still faces myriad structural challenges which are difficult to resolve, this could set the country back and pose downside risks to its long-term real GDP growth prospects, which we currently forecast to average 2.0% over the next ten years.

Graduation Follows Achievement Of Two Out Of Three Goals

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