flag Vanuatu Vanuatu: Economic Outline

Economic Indicators

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Vanuatu's economy is gradually recovering from the extensive damages caused by a devastating cyclone in 2015, and reconstruction efforts have started to yield positive results. In 2019, GDP growth reached 3.9% but collapsed to -6.8% in 2020 due to the outbreak of the COVID-19. According to the updated IMF forecasts from October 2021, GDP growth stood at 1.2% in 2021 and is expected to pick up to 3% in 2022 and 4.1% in 2023, subject to the post-pandemic global economic recovery. The archipelago’s economy is driven largely by tourism and construction. The former, in particular, accounts for approximately 40% of GDP and one third of people in formal employment (including tourism-related services). Small-scale agriculture, which provides a living for about two-thirds of the population and makes up 80% of exports, is also pivotal.

The country’s public debt stood at 48.7% of GDP in 2020 and 46.1% in 2021, and is forecasted to increase to 48.9% in 2022, still in line with the World Bank & IMF Debt Sustainability Analysis (DSA, 2022). Estimated inflation for 2020 was at 5.7%, with a slight deceleration to 5.4% in 2021 and then a much lower rate of 2.6% in 2022 (World Economic Outlook IMF, October 2021). Tax revenues come mainly from import duties, and Vanuatu is considered a tax haven by the OECD. In recent years, passport sales (valued at around USD 150,000 each) have been the largest source of revenue for the Vanuatu government. Mineral deposits are negligible. According to IMF forecast, the effects of natural disasters and climate change are expected to deteriorate the fiscal balance by 0.3% of GDP annually. 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: the country is ranked first in the latest World Risk Index 2020 which lists the top 20 most at-risk countries in the world. The political alliances are generally unstable and mostly based on family and kinship allegiances rather than political ideology. In 2015 a corruption scandal prompted the arrest of half of the ruling party’s members of the parliament. Charlot Salwai of the Reunification Movement for Change has been prime minister since January 2016. The country will go to new elections in 2024.

Vanuatu is a poor country, with a GDP Per Capita forecasted to be 2,980 USD in Dec 2021 as reported by International Monetary Fund (up from 2,649 USD in December 2020). Looking ahead, Vanuatu GDP Per Capita is projected to stand at 3,064 USD in December 2025. The country is classified as one of the Least Developed Countries (LDC). In spite of a low unemployment rate (2.1% in 2020 - Asian Development Bank) and the government’s efforts to reduce poverty, Vanuatu’s population (which lives essentially from subsistence agriculture and tourism) must also face the scarcity of transportation infrastructure, healthcare and education.

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 0.990.930.981.041.11
GDP (Constant Prices, Annual % Change) -5.4e0.41.73.13.5
GDP per Capita (USD) 3e2333
General Government Gross Debt (in % of GDP) 47.548.250.451.051.3
Inflation Rate (%) 5.32.34.63.42.9
Current Account (billions USD) 0.030.02-0.09-0.020.02
Current Account (in % of GDP) 2.72.1-9.0-1.72.2

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

Note: (e) Estimated Data


 
Monetary Indicators 20162017201820192020
Vanuatu Vatu (VUV) - Average Annual Exchange Rate For 1 GBP 146.46136.65146.98142.88147.92

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) 56.8 14.1 29.1
Value Added (in % of GDP) 26.9 11.5 n/a
Value Added (Annual % Change) 4.2 3.2 2.4

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

Main Online Newspapers and Portals
Vanuatu Newspapers, News Sites and Guides
Daily Post
Vanuatu News
BBC Country Profile, Vanuatu
Useful Resources
Ministry of Finance
Central Bank
 
 

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Latest Update: October 2022

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