IMF Staff Concludes Visit to the Federated States of Micronesia
IMF News, November 16, 2016
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Bibliographic details
- Published: November 16, 2016
Mission and context
- An IMF team led by Serkan Arslanalp visited Pohnpei from November 10‒16, 2016, to review economic developments in advance of discussions for the 2017 Article IV consultations (expected to take place during the summer of 2017).
- End-of-Mission press releases convey preliminary findings after a visit; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- PRESS OFFICER contact: Keiko Utsunomiya. Phone: +1 202 623-7100. Email: MEDIA@IMF.org
Key economic findings
- “Growth in the Micronesian economy returned to positive territory in FY2015 (ending September 30), as the fishery sector expanded.”
- Output grew by 3.7 percent.
- Headline inflation dropped to -0.2 percent, amid falling oil and utility prices.
- The fiscal balance recorded a surplus of about 10 percent of GDP, due to increased fishing license fees.
- “The strong growth momentum is estimated to have carried into FY2016, with GDP growth expected to be around 2 percent during FY2016-17.”
Risks and scenarios
- Identified downside risks:
- Extreme weather-related events (in the context of climate change).
- Further delays in the implementation of infrastructure projects.
- Declining U.S. Compact grants.
- Trust fund trajectory concerns:
- “The current trajectory of the Compact Trust Fund is not on track to fully offset expiring U.S. grants after FY2023, while the FSM Trust Fund will partially offset the shortfall.”
- “Uncertainties surrounding the global economy could pose risks to trust fund returns and underscore the importance of strengthening fiscal buffers.”
- Upside scenario:
- “A decisive push for structural reforms could boost potential growth.”
Policy priorities and recommendations
- Overarching priorities: securing fiscal sustainability, building resilience to natural disasters and climate change, and promoting private sector growth.
- Specific recommendations:
- Implement “Action Plan 2023” prepared for the scheduled expiration of U.S. Compact grants.
- Provide explicit recognition of the costs of natural disasters and climate change in a medium-term fiscal framework to help build policy buffers.
- Address weaknesses in infrastructure, access to finance, and the business environment to foster private sector growth and achieve the government’s long-term development agenda.
Concluding remarks
- “The team is grateful to the authorities for their hospitality and representatives of the government and the private sector for the open and constructive dialogue.”
Press Release No. 16/514 — November 16, 2016.