Federated States of Micronesia: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Federated States of Micronesia

IMF Staff Country Reports, November 1, 2021

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Canonical URL: Federated States of Micronesia: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Federated States of Micronesia

The COVID-19 pandemic and related containment measures have put severe strains on the economy.
The economic policy response has been strong and generally appropriate, helping counter the negative effects of the pandemic.
With international borders remaining shut, the economic contraction is likely to deepen in FY2021.
A slow recovery is expected for FY2022 driven by a gradual border reopening.
The FSM faces significant medium-term uncertainty owing to the possible expiration of grants and other assistance provided under the Compact Agreement with the United States.
The FSM is highly vulnerable to climate change-induced natural disasters.

FY2021: economic contraction likely to deepen while international borders remain shut.
FY2022: a slow recovery expected, driven by gradual border reopening.

Possible expiration of grants and other assistance under the Compact Agreement with the United States creates significant medium-term uncertainty.
High vulnerability to climate change-induced natural disasters.
Continued closure of international borders poses downside risk to near-term output.

The report characterizes the FSM authorities' economic policy response to the pandemic as "strong and generally appropriate," noting it helped counter negative pandemic effects.
Implicit policy focus: support recovery via border reopening management and prepare for potential loss of Compact Agreement assistance.

Subject: COVID-19, External debt, Health, International organization, Monetary policy, Public debt, Public financial management (PFM), Revenue administration
Keywords: COVID-19, FSM authorities, FSM authority, FSM economy, FSM remain, Global, island state, Pacific Islands, policy support