Economic Outline

flag Vanuatu Vanuatu: Economic Outline

Economic Indicators

Vanuatu's economy is gradually recovering from the extensive damages caused by devastating cyclones between 2015 and 2022, and reconstruction efforts have started to yield positive results. Despite the impact of twin cyclones earlier in the year and growth initially being downgraded, growth reached 2.5% in FY23. Economic activity was mainly attributed to the industry and services sectors, especially as tourist arrivals improved, reaching 65% of pre-COVID levels as of 2023. In the agriculture sector, the contraction from cyclone damage was less severe than anticipated, as economic activity is concentrated in the north, which was less affected by the cyclones. The economy is projected to grow by 3.7% in 2024, mostly driven by infrastructure investment, such as the upgrade of airports and roads construction, significantly scaled up in the 2024 budget. Reconstruction efforts are expected to stimulate economic activity over the medium term (data World Bank).

Vanuatu encountered an estimated fiscal deficit of 4% of GDP, supported by robust Value Added Tax (VAT) revenue despite delayed project spending, marking an improvement from 2022. The government is actively advancing the Universal Cash Transfer (UCT) initiative, designed to aid household recovery from the twin cyclones. However, the fiscal deficit is expected to widen to 7.6% of GDP, primarily due to increased capital expenditures, despite enhanced fishing revenues. A current account deficit of 4.5% of GDP is anticipated for 2024, which will partially offset the modest recovery of tourism and goods exports. Inflation is estimated to have averaged 9.3% in 2023, primarily due to disruptions in domestic supply chains caused by the cyclone impacts, factors related to minimum wage adjustments, and elevated food prices. It is anticipated to continue surpassing the reserve bank's target band of 0-4% in the near future (data World Bank). The island economy continues to rely heavily on foreign aid and concessional loans from international development agencies. Economic development is hindered by dependence on relatively few commodity exports, vulnerability to natural disasters, and long distances from main markets and between constituent islands. Climate change is a threat to this sector due to rising sea levels and violent cyclones.

Vanuatu is a poor country, with a GDP per capita estimated at USD 3,290 in 2022 (World Bank). The poverty rate, measured with the lower-middle-income poverty line, is forecasted to remain elevated, hovering around 43%, until 2026. Due to the country's relatively high population growth, the growth in per capita income is insufficient to effectively reduce poverty. According to the World Bank, the country’s unemployment rate stood at 5.2% in 2023, stable compared to the previous year.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 1.041.171.291.401.50
GDP (Constant Prices, Annual % Change) 1.92.23.03.53.1
GDP per Capita (USD) 3,2193,5013,7343,9204,061
General Government Gross Debt (in % of GDP) 44.140.444.047.651.8
Inflation Rate (%) 6.712.07.66.04.4
Current Account (billions USD) -0.13-0.06-0.06-0.04-0.04
Current Account (in % of GDP) -12.5-4.7-4.3-3.1-2.6

Source: IMF – World Economic Outlook Database - October 2021.

Note: (e) Estimated Data


 
Monetary Indicators 20162017201820192020
Vanuatu Vatu (VUV) - Average Annual Exchange Rate For 1 MUR 3.053.083.253.222.93

Source: World Bank - Latest available data.

 

Main Sectors of Industry

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 48.0 8.5 43.5
Value Added (in % of GDP) 21.2 10.0 59.8
Value Added (Annual % Change) 0.9 4.9 0.8

Source: World Bank - Latest available data.

 

The Active Population in Figures

201820192020
Labour Force 125,176128,492129,602

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 70.58%70.59%70.55%
Men activity rate 79.56%79.53%79.46%
Women activity rate 61.66%61.69%61.67%

Source: International Labour Organization, ILOSTAT database

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
60,5/100
World Rank:
97
Regional Rank:
18

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
2/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

Sources of General Economic Information

Useful Resources
Ministry of Finance
Reserve Bank of Vanuatu
 
 

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Latest Update: May 2024