Financial Crime World

The Economic Situation of the Republic of the Marshall Islands: Challenges and Response to COVID-19

Economic Outlook

The economic outlook for the Republic of the Marshall Islands (RMI) is currently uncertain due to various challenges. Some key points are outlined below:

  • Economic decline: The RMI economy is expected to decline by 2 percent in FY2021 due to border closures and containment measures.
  • Strong rebound expected: However, the authorities expect a strong economic rebound in FY2022 as containment measures subside.

Fiscal Risks

The country faces significant fiscal risks that could impact its economic stability. Some of these risks include:

  • Potential “fiscal cliff”: The RMI may face a potential “fiscal cliff” if Compact grants are reduced or not renewed in FY2023.
  • External debt distress risks: If the government resorts to non-concessional external financing, external debt distress risks could rise further.

COVID-19 Response

The RMI government has taken comprehensive fiscal measures to mitigate the economic impact of the pandemic. Some key points include:

  • Increased COVID-19 Response Plan: The government increased the COVID-19 Response Plan from 18 percent of GDP to 27 percent of GDP.
  • Grant financing: Development partners provided grant financing of about 21 percent of GDP for COVID-related spending in FY2020-21.

Infrastructure and Construction Projects

Planned infrastructure and construction projects have been impacted by border closures, which have prevented the arrival of foreign experts and impeded imports of capital goods. This has resulted in project delays and potential losses.

Overall, the RMI faces significant economic challenges due to the COVID-19 pandemic. However, the authorities are taking steps to mitigate the impact of the pandemic through fiscal measures and expect a strong rebound in FY2022.