Economy of Palau

Rock Islands in Palau - Such scenery has helped invite tourism and build up Palau's
economy.

The economy of Palau consists primarily of subsistence agriculture and fishing. The
government is the major employer of the work force, relying heavily on financial
assistance from the United States. The population enjoys a per capita income of more
than twice that of the Philippines and much of Micronesia. Long-term prospects for the
tourist sector have been greatly bolstered by the expansion of air travel in the Pacific and
the rising prosperity of leading East Asian countries.

Palau's per capita GDP of $8,900 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 1997 Asian financial crisis.

Industries
Tourism is Palau's main industry. Activity focuses on scuba diving and snorkeling among
the islands' rich marine environment, including the Floating Garden Islands to the west of
Koror. The number of visitors85% of whom come from Japan, Taiwan, and the U.S.
reached nearly 67,000 in 1997, more than quadruple the level of a decade earlier.
Tourism earned $67 million in foreign exchange for Palau in 1996, (which is 1,000
dollars per person) accounting for roughly half of GDP. Arrivals from Asian countries
dropped in 1998 and 1999 due to the regional economic downturn and the depreciation of
many Asian currencies against the dollar, which made Palau's dollar-denominated prices
more expensive.

The service sector dominates the Palauan economy, contributing more than 80% of GDP
and employing three-quarters of the work force. The government alone employs nearly
30% of workers. 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, $30 million per
year, 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. U.S. grants in 1999 totaled $24 million.

Construction is the most important industrial activity, contributing over 9% of GDP.

Several large infrastructure projects, including the rebuilding of the bridge connecting
Koror and Babeldaob Islands after its collapse in 1996 and the construction of a highway
around the rim of Babeldaob, boosted activity at the end of the 1990s.
Agriculture is mainly on a subsistence level, the principal crops being coconuts, root
crops, and bananas. Fishing is a potential source of revenue, but the islands' tuna output
dropped by over one-third during the 1990s.

There are no Patent Laws in Palau. [1]

Economic challenges
The main economic challenge confronting Palau is to ensure the long-term viability of its
economy by reducing its reliance on foreign assistance. Palau has created a trust fund to
be drawn upon after the cessation of Compact grants, the value of which had grown to
$140 million by the beginning of 2009. Also, in the late 1990s, Palau was affected by the
1997 Asian Financial Crisis, and their economy suffered.

Economic statistics
Income

Gross Domestic Product (GDP): purchasing power parity - $132 million (2009 est.)
(GDP estimate includes U.S. subsidy)

GDP - real growth rate: 1% (2009 est.)

GDP - per capita: purchasing power parity - $8 500 (2009 est.)

GDP - composition by sector

agriculture: N/A
industry: N/A
services: N/A

Population below poverty line: N/A

Household income or consumption by percentage share

lowest 10%: N/A

highest 10%: N/A

Inflation

Inflation rate (consumer prices): 3.4% (2000 est.)

Workforce

Labor force: 10 200 (2000)

Labor force - by occupation

Agriculture: 20%
Industry: N/A
Services: N/A

(1990)

Unemployment rate: 4.2% (2000 est.)

Budget

Revenues: $57.7 million

Expenditures: $80.8 million, including capital expenditures of $17.1 million (FY
98/99 est.)

Industries

Dominant industries include tourism, craft items (from shell, wood, pearls), construction,
and garment making.

Industrial production growth rate: N/A

Electricity

Electricity - production: 200 MWh (1996)

Electricity - production by source

Fossil fuels: 85%

Hydro: 15%
Nuclear: 0%
Other: 0%

(1996)

Electricity - consumption: 200 MWh (1996)

Electricity - exports: 0 kWh (1996)

Electricity - imports: 0 kWh (1996)

Trade

Agriculture - products: coconuts, copra, cassava (tapioca), sweet potatoes

Exports: $18 million (f.o.b., 2001)

Exports - commodities: trochus (type of shellfish), tuna, copra, handicrafts

Exports - partners: U.S., Japan, Singapore (2000)

Imports: $99 million (f.o.b., 2001 est.)

Imports - commodities: machinery and equipment, fuels, metals, foodstuffs

Imports - partners: U.S., Guam, Japan, Singapore, Korea (2000)

Debt and aid

Debt - external: $57 million (FY08/09)

Economic aid - recipient: $155.8 million. Note: the Compact of Free Association with
the U.S., entered into after the end of the UN trusteeship on 1 October 1994, provides
Palau with up to $700 million in U.S. aid over 15 years in return for furnishing military
facilities.

Currency

1 United States dollar (US$) = 100 cents

Exchange rates: U.S. currency is used

Fiscal year

1 October 30 September

Palau: Economy
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Revised estimates show Palau economy grew 9.4% in FY2015, well above the earlier
estimate of 6.7%
Palau economy forecast to grow by 2% in 2016 and 5% in 2017.

Revised estimates show Palaus economy grew by 9.4% in Fiscal Year 2015,
well above the earlier estimate of 6.7%. Growth reflected a dramatic increase in
tourist arrivals, in particular by visitors on package tours from the Peoples
Republic of China. However, the challenges to sustaining such high increases in
 visitor arrivals became clear this year, prompting government measures to slow
tourist inflows and encourage Palaus development as a high-end ecotourism
destination. Read more from Asian Development Outlook 2016 Update

Created with Highcharts 4.1.9GDP Growth: Palau% per year4.44.44.43.13.13.1-2.4-2.4-

2.44.24.24.29.49.49.4201120122013201420152014 GDP Growth: 4.2

Economic forecasts for Pacific countries

GDP growth

(%, year)

Inflation

(%, year)

Current account balance

(% of GDP)

Country 2016 2017

Cook Islands 4.2 4.0

Fiji 2.4 4.5

Kiribati 1.8 1.5

Marshall Islands 1.5 2.0

Micronesia, Federated States of 2.0 2.5

Nauru 3.0 15.0

Palau 2.0 5.0

Papua New Guinea 2.2 3.0

Samoa 5.0 2.0

Solomon Islands 2.7 2.5

Timor-Leste 5.0 5.5

Tonga 3.1 2.6

Tuvalu 3.0 3.0

Vanuatu 3.5 3.8

Average 2.7 3.5

Country 2016 2017

Cook Islands 0.7 2.0

Fiji 3.5 3.0

Kiribati 0.7 2.0

Marshall Islands -1.3 1.0

Micronesia, Federated States of -0.3 1.5

Nauru 6.6 1.7

Palau 1.5 2.5

Papua New Guinea 6.5 7.5

Samoa 0.1 2.0

Solomon Islands 3.3 4.5

Timor-Leste 1.2 3.0

Tonga 2.0 1.9

Tuvalu 2.0 2.0

Vanuatu 1.9 2.4

Average 4.7 5.5

Country 2016 2017

Cook Islands 37.3 41.3

Fiji -7.0 -1.2

Kiribati 7.0 -2.6

Marshall Islands 10.0 8.9

Micronesia, Federated States of 3.8 2.0

Nauru ... ...

Palau -2.3 -1.3

Papua New Guinea 7.9 9.0

Samoa -3.9 -5.3

Solomon Islands -4.4 -6.1

Timor-Leste 36.1 10.2

Tonga -6.0 -7.6

Tuvalu -1.2 -18.7

Vanuatu -15.0 -13.5

Average 7.2 5.8

= no data available.
Source: Asian Development Outlook 2016 Update