MANILA, PHILIPPINES (28 April 2021) — The economic recovery from the
coronavirus disease (COVID-19) pandemic in tourism-dependent, Polynesian countries
will be slow, with continued support needed to allow the private sector to drive future
economic growth, says a new Asian Development Bank (ADB) report.
The Asian Development Outlook (ADO) 2021, ADB’s flagship annual economic
analysis, projects the economies of the Cook Islands, Samoa, and Tonga will continue
to decline in 2021 with economic contraction and fiscal deficits deepening. The report
predicts the resumption of international travel will see gross domestic product (GDP)
growth return to positive in each country in 2022, but their economies will still be smaller
than before the outbreak of the pandemic.
“The tourism-dependent economies of the Cook Islands, Niue, Samoa, and Tonga have
been hit hard by COVID-19,” said Public Management Economist and ADO report
author James Webb of ADB’s Pacific Subregional Office in Fiji. “While lives have been
saved, livelihoods have been lost. To preserve future jobs and maximize the eventual
economic recovery, it is imperative that spending sustains the private sector to survive
and compete.”
The ADB report describes the profound effect COVID-19 has had on private businesses
in Polynesia. Income from tourism—which in 2019 accounted for 61% of GDP in the
Cook Islands, 23% in Samoa, and 10% in Tonga—has fallen to zero so far in 2021.

While the direct and indirect impact of this cannot yet be fully assessed, the report says
it will continue to worsen until travel resumes.
In the Cook Islands, the economy contracted by 5.9% in 2020, contributing to a fiscal
deficit equal to 2.8% of GDP. After a full fiscal year of almost no tourism, the ADO
projects a further contraction of 26% in 2021 leading to a 33.1% deficit. The latter
estimate incorporates $25.5 million in government stimulus spending—mainly wage and
business subsidies—and a 45.2% fall in tax revenue.
ADB assisted the Cook Islands with a $1 million grant and loans totaling $30 million
over 2021. The ADO projects economic growth in 2022 of 6%—and a deficit equivalent
to 11.2% of GDP—after the opening of a proposed travel bubble with New Zealand.
Dramatically reduced tourist arrivals in Niue likely caused an economic contraction in
2020, ending a 7-year uninterrupted stretch of 4.6% average growth since 2013. On top
of the decline in tourism, travel restrictions stalled capital projects financed by
development partners. A more severe contraction is forecast for 2021 as tourism
remains suspended perhaps for the entire year. Economic recovery is projected in
2022, assuming the establishment of a travel bubble with New Zealand in the last
quarter of 2021 following parallel COVID-19 vaccination drives in both countries.
In Samoa, GDP contracted 3.2% in 2020, with the onset of COVID-19 coming after a
measles outbreak in late-2019. While visitor arrivals fell 30.2% and commerce and
manufacturing declined, remittances grew by 4.9%.
The ADO says Samoa’s economy will contract a further 9.2% in 2021 before recovering
to 3.1% growth in 2022. Despite increased grants from development partners, including
$22.9 million from ADB, a fiscal deficit equal to 3.1% of GDP is projected for 2021,
when government stimulus spending will equal 4.2% of GDP.
In Tonga, the twin shocks of Tropical Cyclone Harold and the onset of COVID-19 in
April 2020 saw the economy contract by 0.5% in 2020. The ADO says continued decline
in the construction and tourism sectors will contribute to a 5.3% contraction in 2021,
before a return to growth of 1.8% in 2022.
Development partner grants—including $18.7 million from ADB—contributed to a fiscal
surplus equivalent to 5.3% of GDP in 2020. The ADO predicts this will narrow to 0.8% of
GDP in 2021 and become a fiscal deficit equal to 5.9% of GDP in 2022 due to stimulus
spending and reduced tax revenue.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia
and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in
1966, it is owned by 68 members—49 from the region.
ADB has been supporting Samoa since 1966 and has committed $190.9 million in
loans, $204.4 million in grants, and $33 million in technical assistance. Cumulative loan
and grant disbursements to Samoa amount to $258.1 million.