Economic Analysis - PACER Plus Has The Potential To Boost LT Growth Prospects - SEPT 2017


BMI View: We maintain our forecast for Kiribati's real GDP growth to average 2.0% per annum over the coming decade, but note that membership into the PACER plus FTA could lift its long-term growth outlook if necessary reforms are taken to improve the business environment and boost the country's competitiveness.

Kiribati signed on to the Pacific Agreement on Closer Relations (PACER) Plus regional trade agreement in Nuku'alofa on June 14. In our view, this is a positive development for the Kiribati economy, but the potential impact on the country's long-term growth prospects will hinge on the government's ability to improve the business environment, address the dominance of SOEs in the economy, and expand its narrow economic base. Even though the country continues to suffer from structural challenges such as geographical remoteness, vulnerability to climate change, and lack of significant natural resources beside fishing ( see ' Key Economic Vulnerabilities Require Attention, July 27 2015), we believe that it is possible for Kiribati to reap considerable benefits from its membership to the free trade agreement (FTA). For now, we are maintaining our forecast for Kiribati's real GDP growth to average 2.0% over the next decade, but will look to upgrade the country's long-term growth outlook if necessary reforms are implemented to leverage the PACER plus FTA.

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