Seminar Series: Abstract

The Impact of the Global Financial Crisis on the Pacific Islands
Jon Fraenkel

The global recession which commenced in the second half of 2008 has been transmitted to the Pacific Islands in several ways. Undeveloped financial sectors in Oceania protected the region from the worst fallout of the US sub-prime mortgage crisis, but trust funds in Palau, the Marshall Islands, Tuvalu and Kiribati were badly affected by the collapse in world equity markets. Commodity price declines have damaged export earnings in parts of Melanesia, while falling earnings from tourism and remittances put pressure on the balance of payments in many parts of Polynesia and Micronesia (although aid has generally been reasonably well sustained). Nevertheless, the paper argues that the impact of (i) the 2008 rise in fuel and food prices, and (ii) the 2006 coup-sparked contraction in Fiji, as well as (iii) the severe 2007 adjustment in Nauru are together likely to have a more severe impact on living standards in Oceania than the global recession. The paper covers some detail about fundamental contrasts between the economies of Oceania, recommends some healthy scepticism about the accuracy of statistical data across the region and makes a plea for a new approach to the political economy of the Pacific Islands.