Tuvalu : Economy

Economy

GNI: 
US$63m
GNI PC: 
US$6,630
GDP Growth: 
0.5% p.a. 2009–13
Inflation: 
0.3% p.a. 2009–13

In terms of population, Tuvalu is among the smallest countries in the world. It has very few resources and few sources of revenue – fishing licences, remittances from overseas workers (especially seamen and those living in New Zealand), small-scale copra exports, sale of postage stamps and coins, sale of passports and resale of rights to international telephone codes (initially to the sex industry and subsequently for gambling) – and balance-of-payments deficits have to be made up by income from the Tuvalu Trust Fund and bilateral aid, especially from Australia and New Zealand. During 1988–98 GDP growth averaged 5.2 per cent and was among the highest in Pacific Island economies.

In 1987, the governments of Australia, New Zealand, the UK, Japan and South Korea (and Tuvalu itself) acknowledged that the country would need financial support for the foreseeable future, and each government agreed to contribute money to set up a Tuvalu Trust Fund. The fund is invested by commercial fund managers and income is drawn by the government as required, so long as its current value is above its real value according to the Australian consumer price index. At its foundation, the fund totalled A$27.1 million; subsequent contributions – mainly by Tuvalu itself – added a further A$38.6 million; and the fund was valued in September 2012 at A$127 million.

In August 1998 a North American company agreed to lease Tuvalu’s internet domain ‘.tv’. In December 2001 another company took over the lease agreeing to pay the Tuvalu government US$2.2 million a year plus five per cent of revenue exceeding US$20 million per year for the right to market ‘.tv’ until December 2016.

People on Funafuti have a higher income than those living mainly at subsistence level on the outer islands. The country looks to regional co-operation, through the Pacific Community and in smaller groupings on matters of common interest such as fisheries, the marketing of copra and the expansion of regional air services.

After 1998 growth slowed, in the face of the international downturn. It then raced ahead in 2000–01, moderating but generally good in 2002–07. Then, in response to the world economic downturn of 2008–09, the economy contracted – by 4.4 per cent in 2009 and 2.7 per cent in 2010 – before it recovered in 2011–15.