Vanuatu’s economy: is the glass half empty or half full?

Timo Henckel is a Fellow in international and development economics at the Crawford School of Economics and Government, The Australian National University Vanuatu’s economy paints a picture of contradictions: it has continued on the recent growth path with low inflation, government budget surpluses, and increased capital inflows. Yet successful management of the economy has not translated into a significant increase in per capita income levels. The country faces a host of structural problems that prevent growth rates from being even higher. These include high costs of doing business, political instability, high dependence on foreign aid, inadequate infrastructure investment, inefficient tariffs on international trade and, perhaps most importantly, insecure property and land rights. The reform process initiated by the current government promises to address some of these growth constraints but further bold reforms are necessary for living standards in Vanuatu to rise appreciably.