The return of cruise tourism will provide added boost to Cook Islands’ projected economic growth. Photo: Supplied/2206286
The Government’s books have been opened, and strong growth is projected over the next three years as the country hopes to climb out of Covid-19-related woes.
The Pre-Election Economic and Fiscal Update (PEFU), compiled by the Ministry of Finance and Economic Management (MFEM), went public on Monday afternoon.
It predicts GDP growth of
17.1 per cent for the 2022/23 financial year, 11.2 per cent in 2023/24, and 3.5
per cent in 2024/25.
This comes off the back of
negative growth of -7.9 per cent in 2019/20 and -14.6 per cent in 2020/21, with
the PEFU noting that these years were significantly affected by the “financial
shock” of Covid-19 and border closures.
“In 2021/22, with
six months of borders being open to some markets (primarily New Zealand) has
seen economic performance turn around somewhat, with 12.1 per cent growth
expected (from a low base) on the due to an expected total of 50,000 visitors,”
the PEFU says.
“The economic outlook is largely determined by the speed at which visitors
return to the Cook Islands. With uncertainty surrounding airline links and the
broader international travel situation still not completely returned to
‘normal’, conservative assumptions have been used in developing these
Rarotonga businessman Fletcher Melvin said the PEFU's predictions were
“optimistic”, but achievable.
“I think there is going to be an increase in growth, maybe not as high
as the PEFU predicts, but it’s certainly possible,” Melvin said.
“If you go around the resorts and markets, things are certainly looking
However, Melvin said there was a need to look at the global situation,
with increased inflation and the event of a worldwide recession something to be
“But right now, the labour issue is number one. A lot of businesses have
staffing shortages as a result,” he said.
“If we want to meet those numbers (in the PEFU), we need more access to
people. Right now, a number of businesses can simply not meet demand.”
Cook Islands Tourism Corporation chief executive Karla Eggelton said “at
this time we are tracking ahead of forecast predictions so current numbers are
“We should be reminded that Cook Islands is incredibly susceptible to
airline movements, and things can change overnight without notice,” Eggelton
“If this occurs then we remain optimistic that we are able to pivot and
access new opportunities to realise these numbers.”
The PEFU notes the growth for the
whole year is assumed to be free of border-closures, bringing the economy back
to the same nominal size as pre-Covid-19.
“Part of this growth is in expected higher inflation, with a combination
of capacity constraints within country (particularly in the form of labour) and
global issues on the supply chain and energy price fronts pushing prices
higher,” the PEFU says.
Cook Islands Tourism Industry Council president Liana Scott
said although Cook Islands was experiencing fantastic comparable growth at
the present time, there was “still concern for our shoulder low season,
particularly without a North American or Australian direct connection”.
“I certainly hope for our economies’ sake
that the Cook Islands remains a priority to these carriers,” Scott, the general
manager of the Muri Beach Club Hotel, said.
However, the PEFU also
notes the scale of the economic impact to the Cook Islands is highlighted in
the total taxation revenue currently estimated at $107.6 million in 2021/22,
just 67.6 per cent of 2018/19 pre--Covid levels ($159.1 million), but an
improvement of 24.3 per cent over 2020/21 taxation revenue of $86.5 million.
Meanwhile, taxation revenue forecasts indicate that total tax revenue
will increase to $139.3 million in 2022/23, an increase of 29.5 per cent on
2021/22 levels, primarily driven by recovery in income tax levels and an increase
in departure tax.
The PEFU also predicts the Government will run fiscal deficits in the
2022/23 financial year ($39.8m), as well as in 2023/24 ($5.2m), before
returning to a fiscal surplus in 2024/25 of $3.4m.
“These projections are sensitive to actual economic recovery in GDP
along with actual Government expenditure in 2022/23 and 2023/24,” the PEFU
“The estimated performance against the fiscal rules is based on
conservative economic and fiscal estimates, which assume a gradual economic recovery
and full expenditure of Government’s appropriation in each year. Considering
the significant uncertainty inherent in the forecasts due to the ongoing
impacts of Covid-19, a conservative approach remains prudent.”