Are the Asia and Pacific Small States Different from Other Small States?

IMF Working Papers, May 22, 2013

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Are the Asia and Pacific Small States Different from Other Small States?

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Bibliographic details

• Authors: Patrizia Tumbarello, Ezequiel Cabezon, Yiqun Wu
• Published: May 22, 2013
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484339190.001

Summary

• The small states of the Asia and Pacific region face unique challenges in raising their growth potential and living standards relative to other small states due to:
  • small populations,
  • geographical isolation and dispersion,
  • narrow export and production bases,
  • exposure to shocks,
  • heavy reliance on aid.
• Additional key challenges identified are:
  • higher fixed government costs,
  • low access to credit by the private sector,
  • capacity constraints.
• The econometric analysis confirms that the Pacific Island Countries (PICs) have underperformed relative to their peers over the last 20 years.
• Although these countries often face more limited policy tools, policies do matter and can further help build resilience and raise potential growth, as evidenced in the recent business cycle.
• Recommended broad directions:
  • continue rebuilding buffers,
  • improve the composition of public spending to foster inclusive growth,
  • pursue regional solutions.

Findings and Analysis

• Empirical result:
  • The Pacific Island Countries (PICs) have underperformed relative to their peers over the last 20 years.
• Structural constraints highlighted:
  • small populations,
  • geographical isolation and dispersion,
  • narrow export and production bases,
  • exposure to shocks,
  • heavy reliance on aid,
  • higher fixed government costs,
  • low access to credit by the private sector,
  • capacity constraints.
• Policy relevance:
  • Despite more limited policy tools, appropriate policies have been shown to matter in building resilience and raising potential growth, with support from recent business cycle evidence.
• Recommended focus areas to address constraints:
  • rebuilding fiscal and external buffers,
  • improving the composition of public spending for inclusiveness,
  • strengthening regional cooperation and solutions.

Policy Recommendations

• Rebuild buffers (fiscal and external) to enhance resilience to shocks.
• Improve the composition of public spending with an emphasis on supporting inclusive growth.
• Pursue regional solutions to address challenges stemming from small size, isolation, and dispersion.
• Enhance private sector access to credit and address capacity constraints to support growth and diversification.

Content in this bundle

• 1. Special Challenges Facing Pacific Islands Micro States
  • 1. Special Challenges Facing Pacific Islands Micro States (Markdown version)
  • 1. Special Challenges Facing Pacific Islands Micro States (PDF)