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Economic Brief: Marshall Islands

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Macro-Economic Context

The economy of the Marshall Islands (RMI) is expected to experience strong growth, driven by tourism and remittances. However, the country’s money exchange company faces significant challenges due to surging oil prices.

  • The potential doubling of fuel costs and 40% increase in electricity tariffs could have a major impact on the economy.
  • Other factors contributing to the economic context include:
    • Strong growth fueled by tourism and remittances
    • Challenges posed by surging oil prices

Inflation

Inflation is expected to rise significantly in the coming months due to increased fuel costs.

  • The RMI’s inflation rate has been relatively low, but recent trends suggest an upward trajectory.
  • Rising fuel costs are likely to lead to higher prices across various sectors of the economy.

Wages

Real wages have risen since FY13, with private sector real wages increasing by 6% and public sector real wages by 2.4%. However, from FY2022 onwards, rising inflation is likely to reverse these gains, leading to a decline in real incomes.

  • The wage differential between the private and public sectors remains large.
  • Key points about wages:
    • Real wages have increased since FY13
    • Private sector real wages up 6%, public sector up 2.4%
    • Rising inflation expected to reverse these gains

COVID-19 Mitigation Programs

The RMI’s COVID-19 Preparedness and Response Plan sets out a framework for mitigation efforts, supported by significant donor assistance programs.

  • Total funding of $70.6 million has been allocated across various categories:
    • Health mitigation: $30.2 million
    • Household mitigation programs: $14.1 million (CARES support and ADB-funded hot lunch program)
    • Education support through CMI: $1.9 million (Federal Program)
    • Private sector business support: $6 million (Preparedness Plan)
    • General budgetary support: $18.4 million

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