ECONOMY
Palau's per capita GDP of $8,412 makes it one of the wealthier Pacific Island states. Nominal GDP increased by an annual average of nearly 14% from 1983 to 1990, and by an annual rate of over 10% from 1991 to 1997. Growth turned sharply negative in 1998 and 1999 as a result of the Asian financial crisis, but there has been a gradual rebound in recent years and the economy grew by 5.6% in 2007.
Tourism (and its attendant infrastructure changes) is Palau's main industry. Its major draws are its diverse and pristine marine environment, and its above-water tropical island beauty. The number of visitors--38% from Japan, 25% from Taiwan, 18% from Korea, and 9% from the U.S.--was over 79,000 in 2008, a 10% decrease from 2007. Continental Airlines has direct flights to Palau from Guam and the Philippines. Japan Airlines runs chartered flights from Tokyo, and Korean Airlines does the same from Seoul on a seasonal basis.
In 2007 tourist spending in Palau was estimated at $111.9 million. Palauan
tourism and environmental authorities would like to adjust the industry,
simultaneously decreasing tourist volume and increasing income while by
attracting more high-dollar tourists.
The service sector dominates the Palauan economy, contributing more than 50% of GDP and employing more than half of the work force. The government alone employs nearly 31% of workers and accounts for 20% of the GDP. One of the government's main responsibilities is administering external assistance. Under the terms of the Compact of Free Association with the United States, Palau will receive more than $450 million in assistance over 15 years and is eligible to participate in more than 40 federal programs. The first grant of $142 million was made in 1994. Further annual payments in lesser amounts will be made through 2009. Total U.S. grant income in 2008 was over $20 million.
Construction is an important industrial activity, contributing over 15% of GDP. Several large infrastructure projects, including the Compact Road, relocation of the new capital, and new hotels, have boosted this sector's recent contribution to GDP.
Agriculture is mainly on a subsistence level, the principal crops being coconuts, taro, and bananas. Fishing is a potential source of revenue, but the islands' tuna output dropped by over one-third during the 1990s. Fishing industry revenues are mostly from license fees from fishing vessels.
The main economic challenge confronting Palau is to ensure the long-term viability of its economy by reducing its reliance on foreign assistance. The Compact of Free Association created a trust fund to provide perennial budget support when U.S. direct assistance ends in 2009. The value of the trust fund in mid-2009 was approximately $140 million.
GDP (2007): $167.5 million.
GDP per capita: $8,412.
National income (GDP + foreign assistance): estimated to be over $200 million.
National income per capita: estimated at $10,000.
GDP composition by sector: Trade--21%, public administration--20%, construction--15%, hotels and restaurants--10%, finance and insurance--8%, transport and communication--8%.
Industry: Types--trade, government, construction, tourism.
Trade: Exports ($5.9 million, 2004)--fish, handicrafts. Export markets--U.S., Japan, and Taiwan. Imports ($129.5 million, 2008)--fuel and related minerals, machinery and transport equipment, beverages and tobacco, manufactured goods, and food and live animals. Import sources--U.S. (Guam), Japan, Singapore, Taiwan, and Korea.
External debt (2006): $38 million.
Currency: U.S. dollar.
