Financial Crime World

Tuvalu’s Economic Situation and Prospects in 2021: A World Bank Report

Economic Outlook

Tuvalu’s economic situation is precarious, with high risks and a tilted downside outlook. The prolonged containment measures due to COVID-19 have delayed the resumption of infrastructure projects and hampered private sector activity. This has led to concerns about government revenues falling short of projections.

Key Risks:

  • Delays in agreeing on reform priorities with donors
  • Changes in weather patterns affecting fishing revenues
  • Drop in returns from the Tuvalu Trust Fund

Authorities’ Views

The authorities concur with the staff’s assessment of the macroeconomic outlook and risks. They note that growth risks remain elevated due to:

Uncertainty Surrounding COVID-19 Pandemic

  • Uneven vaccination rates between countries
  • Continued cargo shipments delays impacting construction and domestic trade

Travel Restrictions

  • Pose a risk to seasonal worker schemes with Australia and New Zealand, potentially impacting household incomes

Fiscal Policy

The authorities expect more favorable fiscal outturns due to:

Close Collaboration with Development Partners

  • Receipt of budget support grants as planned
  • Potential for underspending of both the current and capital budgets leading to a small budget surplus in 2021

Securing Green and Sustainable Recovery

The authorities have implemented a large fiscal stimulus package (AUD23.3 million or 29% of GDP) at the start of the pandemic.

Future Fiscal Response

  • Should continue to depend on the path of the pandemic
  • Additional fiscal support focused on vulnerable populations and private sector if needed

COVID-19 Response

The authorities have implemented comprehensive measures to keep Tuvalu COVID-free, including travel restrictions. They hope to receive further vaccine allotments from the COVAX program and development partners to fully inoculate all eligible populations in 2021 and enable the opening of borders.

Overall, the report highlights the challenges facing Tuvalu’s economy due to the pandemic and notes the need for continued vigilance and flexibility in fiscal policy.