Dame Meg Taylor
Wicked Walu Island on the resort-studded Coral Coast of Fiji. Tourism to Fiji has fallen 99% because of Covid restrictions. Photograph: Torsten Blackwood/AFP via Getty
While the worst of the Covid-19 pandemic has so far spared the Pacific, its economies are in free-fall, the region’s chief diplomat warns
Beyond the health and economic crises of Covid-19, the global pandemic has the potential to cause political instability and undermine state security across the Pacific, the region’s chief diplomat has warned.
Dame Meg Taylor, secretary general of the Pacific Islands Forum, said the region’s economies were struggling with the virus-induced shocks, and a prolonged crisis could worsen existing problems of hunger, poor healthcare, and state fragility.
“Covid-19 has exposed and exacerbated systemic and structural imbalances in our systems and societies, underlining the urgency for decisive policy action,” Taylor said.
“If I look at this from what’s happening within communities and different countries, I think some countries are getting harder hit than others, and I think where we’ve seen unemployment, we’ve seen people really struggle,” she said ahead of a virtual meeting of forum economic ministers on Tuesday.
“We’re seeing in places like Nadi low employment and lots of young mothers and carers with children who do not have sufficient resources to be able to feed themselves.”
Extreme poverty in the region could increase by more than 40%, the Australian thinktank Devpolicy found.
Taylor said the region was threatened by health, economic and the ongoing climate crises, all of which require decisive action from governments. And while Pacific countries have largely avoided the health disaster, a severe virus-related economic fallout threatens the economic, political and social fabric of the region.
In response to questions about Covid-19’s impact on political stability and state fragility, Taylor said: “Do I want to go further and predict that there’s going to be unrest? I would hope that there wouldn’t be. But I think … there may be disruptions. People are afraid of what is happening.”
Government revenues across the Pacific have been devastated by precipitous drops in tourism, and the shutdown of export and import industries. Most Pacific countries are forecasting economic contractions in 2020, with recovery not expected until 2021 or longer.
Among the hardest-hit are tourism-reliant countries such as the Cook Islands, Fiji and Vanuatu because of border closures and lockdowns, described as “catastrophic”.
Tourism makes up 40% of Fiji’s GDP. The International Monetary Fund recorded a 99% drop in tourist arrivals to the country in May 2020 compared with the same month last year.
Fiji’s economy is forecast to decline by 21.7% this year, the most of any Pacific nation.
Tourism recovery will largely depend on tourists from Australia and New Zealand, but with the worsening Covid-19 situation in Victoria, Australia’s borders may stay shut for some time.
New Zealand’s prime minister, Jacinda Ardern, has also confirmed that a trans-Tasman bubble with Australia is likely to be delayed for “several months”.
However, she announced on Monday there would be quarantine-free travel to the Cook Islands “this year”. She said NZ officials would head to the Cook Islands, and vice versa, “within the next 10 days” to verify travel procedures and clear a path.
Remittances, a lifeline for many Pacific households, are also expected to decline by 13%, according to the World Bank. This represents a huge downturn for Samoa, Tonga and the Marshall islands, where money sent back by overseas workers account for 40% of average household income.
Given the dire economic situation, there are growing concerns that Pacific governments may use the virus to justify accumulating unsustainable debt.
Fiji has announced a FJ$2bn (A$1.31bn) stimulus package, largely financed by loans, in response to the virus, pushing its debt to GDP ratio to 83.4%.
Similar scenes are being played out across the region, where governments lack the fiscal space or cash reserves to mount a serious response to long-term crises.
“[Virus-related economic fallout] is significantly constraining revenues, and national budgets and will require immediate and consistent financial support in the short- to medium-term to overcome the ensuing fiscal challenges,” Taylor said.
There has been some respite with US$210m in financial assistance by a range of donors, according to the Griffith University’s Covid-19 Pacific aid tracker.
This is separate from assistance Pacific have nations secured individually, including the ADB’s US$200m concessional loan to Fiji, and the establishment of the Pacific Resilience Facility, a regional climate fund, and the Pacific Humanitarian Pathway, which has allowed crucial foreign aid and medical equipment to be flown in during the pandemic.
In some of the first movement around the region, 170 ni-Vanuatu workers will arrive in Australia’s Northern Territory in coming weeks to pick mangoes.