MPO 04/2025 East Asia and the Pacific MACRO POVERTY OUTLOOK Country-by-country Analysis and Projections for the Developing World © 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cambodia North Pacific Islands Central Pacific Islands Papua New Guinea China Philippines Fiji Solomon Islands Indonesia South Pacific Islands Lao PDR Thailand Malaysia Timor-Leste Mongolia Viet Nam Myanmar East Asia and the Pacific Macro Poverty Outlook / April 2025 1 This outlook reflects information available as of April 10, 2025. 1 CAMBODIA Population Poverty million 17.6 .. 2 3 Life expectancy at birth School enrollment Cambodia's real GDP growth is projected to moderate to 4.0 years primary (% gross) percent in 2025 amid global trade policy shifts, heightened uncertainty and slower global growth. While poverty is ex- 69.9 111.4 4 5 pected to decline gradually, the pace of poverty reduction GDP GDP per capita may be constrained by rising inflation, uneven economic current US$, billion current US$ performance across sectors, and heightened vulnerabilities in labor-intensive export industries. 46.5 2636.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. especially garments, travel goods, footwear, and bicycles exports Key conditions and challenges to the US and the EU markets, grew at 14.3 percent y/y during the first two months of 2025. In addition, services As a small open economy with exports accounting for almost 60 exports also improved, with international arrivals growing by percent of GDP, Cambodia is particularly exposed to the ongo- 23.4 percent in 2024, reaching pre-pandemic levels of over 6 ing shifts in global trade policies and rising uncertainty in the million visitors. However, after excluding business visa hold- external environment. The US is Cambodia’s largest export des- ers and trans-frontier workers, the number of internation- tination, accounting for 39 percent of total exports and 29 per- al tourists accounted for only 2 million in 2024, compared cent of GDP, nearly double the share of exports going to ASEAN to 3.5 million in 2019. Similarly, tourist spending continued at 20 percent and the EU27 at 17 percent, while China accounts to improve, indicated by 25.6 percent y/y growth in Angkor for 47 percent of imports and half of FDI. The domestic value- Temple entrance fees in January 2025, but the level of rev- added embedded in exports to the US amounts to 8 percent of enue from entrance fees remained 44.2 percent below pre- GDP—compared to 6 percent of GDP to Europe and 3 percent pandemic levels. to China. The largest exposure by sector is in travel goods, gar- ments, and footwear, which comprise about half of exports to Job growth remained sluggish. Economic activity in the large the US and employ around one million workers—80 percent of informal sector has experienced slower progress. Stalled whom are women. property construction activities have affected seasonal work- ers. The retail and wholesale sectors saw a decline in de- mand for domestic credit financing, with growth in domestic Recent developments credit slowing to 0.3 percent and 1.3 percent, respectively, in 2024. The uneven performance has resulted in disparities in Economic activity picked up in the first quarter of 2025, but perfor- household welfare improvements. Between 2021 and 2023, mance remained uneven. Amid buoyant external demand, goods, household consumption per capita increased by 8 percent FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Merchandise exports and contributions to exports GDP growth growth Percent, percentage points Percentage points 20 40 Projections 15 4.0 4.5 5.1 30 10 20 5 10 0 -5 0 -10 -10 -15 2012 2014 2016 2018 2020 2022 2024e 2026p -20 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 Private consumption Gross fixed investment Exports Imports GTF Others Real growth Agricultural commodities Total exports (YTD, y/y) Sources: Cambodian authorities and World Bank staff projections. Source: Cambodian authorities. Notes: e = estimate; p = projection. Notes: GTF = garment, travel goods, and footwear (and other textile products); YTD = year-to-date; y/y = year-on-year. 2 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. overall, signaling gradual economic gains. However, the bene- fits were unevenly distributed—consumption per capita rose by Outlook 7 percent for the poorest quintile, compared to 10 percent for the richest quintile. Despite improvements witnessed in the first quarter of 2025, real growth is projected to ease to 4.0 percent in 2025 and 4.5 percent On the external side, increasing remittances and tourism rev- in 2026, anticipating adverse impacts from global trade policy shifts enues have helped to counterbalance a sizable merchandise and uncertainty. Jobs and FDI in the labor-intensive manufacturing trade deficit, with the current account deficit expected to export sector, particularly in the garment, travel goods, and widen this year. Sustained FDI inflows enhanced gross inter- footwear industries, would be substantially negatively impacted. national reserves, reaching US$22.2 billion—a 15.5 percent Economic growth is expected to lead to a reduction in poverty, y/y increase in January 2025—adequate to cover around 7 gradually reversing some of the likely increase in poverty caused by months of anticipated imports. the pandemic. However, as the recovery remains uneven, the pace of poverty reduction will vary across regions and sectors. Monetary conditions have become more accommodating due to the easing of US monetary policy. Coupled with the increase in for- The outlook is subject to rising risks. These include challenges from eign currency deposits, this fueled broad money growth at 17.9 heightened global policy uncertainty, slower-than-expected global percent y/y in January 2025. Pressures on the exchange rate also growth, and shifts in trade policy. Given the country’s relatively high eased, and the riel-U.S. dollar exchange rate appreciated in January level of private debt, a faster-than-expected increase in non-perform- 2025, reaching 4,030 riel per U.S. dollar. ing loans, and emerging risks from imported inflation could affect macro-financial stability, while weighing on private investment and However, amid the property sector downturn, banking sector growth. In response, policy measures should focus on maintaining asset quality showed signs of deterioration. By the end of macroeconomic and financial sector stability, accelerating trade and 2024, reported nonperforming loan ratios increased to 7.9 investment reforms, and providing social safety nets to protect vul- percent for the banking sector and 9.0 percent for the mi- nerable households. Over the medium term, Cambodia needs to crofinance sector, compared to 5.4 percent and 6.7 percent rebalance its growth model away from a reliance on construction, in 2023, respectively. real estate, and garment exports toward a more diversified and resilient economy. This transition includes fostering higher value- Fiscal policy tightened mainly due to a slowdown in revenue collec- added manufacturing and service sectors, while improving produc- tion which declined by 9.6 percent y/y in January 2025. Public ex- tivity in agriculture. Strengthening human capital, enhancing in- penditure continued to decline, dropping by 5.8 percent y/y in Jan- frastructure, and improving regulatory transparency and efficiency uary 2025. The fiscal deficit is estimated to have narrowed to 3.0 will be critical to sustaining long-term, inclusive growth. In parallel, percent in 2024. Public debt is low, at 27.3 percent of GDP at the boosting domestic revenue mobilization and reinforcing financial end of 2024. sector resilience will support continued macroeconomic stability. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.1 5.0 6.0 4.0 4.5 5.1 Private consumption 5.2 -0.2 2.5 5.1 6.5 4.7 Government consumption -1.2 35.1 -2.5 17.0 9.5 8.4 Gross fixed capital investment 5.4 -26.7 -0.2 -6.2 -4.8 2.8 Exports, goods and services 21.3 6.9 14.4 11.1 10.6 11.1 Imports, goods and services 18.6 -12.4 7.5 10.5 10.8 11.3 Real GDP growth, at constant factor prices 5.1 5.0 8.8 3.9 4.5 5.1 Agriculture 0.6 1.6 1.0 1.4 1.5 1.6 Industry 8.2 7.6 9.5 6.3 6.4 6.5 Services 3.6 3.4 11.3 2.0 3.2 4.5 Inflation (consumer price index) 5.5 2.1 2.2 4.0 4.0 4.1 Current account balance (% of GDP) -18.8 1.3 -1.1 -5.1 -4.6 -4.6 Net foreign direct investment inflow (% of GDP) 8.7 8.5 8.8 7.6 7.6 7.7 Fiscal balance (% of GDP) -3.2 -5.3 -3.0 -2.7 -2.6 -2.0 Revenues (% of GDP) 17.2 16.5 15.2 15.2 15.0 14.9 Debt (% of GDP) 27.0 28.8 27.0 27.8 27.6 27.1 Primary balance (% of GDP) -3.0 -5.0 -2.6 -2.4 -2.2 -1.7 GHG emissions growth (mtCO2e) 1.2 1.4 1.5 1.1 1.1 1.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 3 This outlook reflects information available as of April 10, 2025. KIR NRU TUV CENTRAL PACIFIC Population 1 130.5 11.8 10.0 ISLANDS thousand Poverty 24.2 2.2 2.1 2 3 4 thousand living on less than $3.65/day Medium-term growth is expected to moderate. However, it is 0.22 0.15 0.06 1 projected to remain relatively robust in Kiribati and Tuvalu. In GDP Nauru the Regional Processing Centre (RPC) renewal and Nau- current US$, billion ru-Australia Treaty will delay a fiscal cliff. Each country will 1702 11914 4908 1 need to address a narrow economic base and climate vul- GDP per capita nerability to promote growth and reduce poverty. Asset price current US$ volatility may affect Kiribati and Tuvalu’s fiscal and growth out- Sources: WDI, World Bank. 1/ 2022. 2/ 2019. 3/ 2012. 4/ 2010. look, but the full impact of recent measures is uncertain. Nauru relies on volatile revenue from fishing and revenue from op- Key conditions and challenges erating the RPC for refugees (the latter 67 percent of fiscal rev- enues and 90 percent of GDP in 2024). With RPC earnings uncer- The Central Pacific faces major exogenous challenges like cli- tain, it is important to find sustainable sources of growth. Nauru mate change, small size, and remoteness, and endogenous grapples with environmental challenges from climate change and challenges like concentrated, import-reliant, and volatile phosphate mining. economies, dependent on the public sector. All three coun- tries have ample trust funds to stabilize fiscal revenues Tuvalu faces extreme vulnerabilities due to climate change. Private and provide long-term development financing. However, they sector development is hindered by inadequate infrastructure and must diversify these revenues to reduce volatility and fund limited economies of scale. 2010 estimates indicate that 26 percent high recurrent spending. of the population lived below the national poverty line. Structural reforms are essential to promote resilience, sustain growth, and Kiribati has a centralized economy, with public expenditure at encourage economic diversification. 98 percent of GDP in 2024. Recurrent spending has expanded on public wages, social protection, and the copra subsidy. This has reduced poverty but distorts markets and risks deficits as Recent developments volatile fishing revenues account for over two-thirds of revenues. It is important to curtail recurrent spending, foster private enter- Kiribati’s public wage expansion increased the fiscal deficit In 2024, Kiribati prise, and stabilize fiscal revenues using its Revenue Equalization to 22 percent of GDP and lifted growth to 5.2 percent, funded by Reserve Fund (RERF). withdrawing from cash reserves and the RERF. Inflation declined to FIGURE 1 / Selected fiscal revenues, 2017-2023 FIGURE 2 / Sovereign wealth funds, 2016-2024 Percent of GDP Fund balance, percent of GDP 160 400 140 350 120 100 300 80 250 60 200 40 20 150 0 100 2017 2018 2019 2020 2021 2022 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024 50 Kiribati Nauru Tuvalu 0 Fishing license fees Regional Processing Centre 2016 2017 2018 2019 2020 2021 2022 2023 2024 .TV domain Other revenue Grants Kiribati Tuvalu Nauru Sources: Country authorities, and World Bank and IMF staff estimates and projections. Sources: Country authorities, and World Bank and IMF staff estimates and projections. Notes: Nauru data are June years; Kiribati and Tuvalu are calendar years. Notes: Nauru data are June years; Kiribati and Tuvalu are calendar years. The Nauru Trust Fund was established in 2016. 4 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 2.6 percent as post-COVID supply constraints eased. it is estimated do not recover in 2025. This could lead to a substantial fiscal con- that poverty fell to 13.1 percent in 2024 (US$3.65 lower-middle-in- traction because the RERF withdrawal rule, loosened in December come country (LMIC) line), below 19.5 percent in 2019, benefitting 2023, allows withdrawals only if returns exceed 2 percent (nomi- from growth as well as from recent increases in social programs nal). Strict adherence to this rule could also deplete the RERF’s bal- (copra subsidy, unemployment benefits) and public wages. Public ance. A rule spending up to 3 percent of the balance would grow its debt (12 percent of GDP) is sustainable but at high risk of distress. real value and stabilize withdrawals. Depositing volatile fishing rev- The RERF was worth 340 percent of GDP in December 2024 after a enues directly into the RERF could also help. Kiribati plans to better withdrawal worth 17 percent of GDP in 2024. target copra subsidies and rationalize public wages and recurrent spending. Further increases in recurrent spending could jeopardize Nauru’s economy grew by 1.8 percent in FY24. Inflation was 4.7 Nauru fiscal responsibility rules. percent, lifted by supply-side constraints. Grants increased from 16 percent of GDP in FY23 to 33 percent in FY24, including higher Nauru’s growth is projected to moderate to 1.4 percent In FY25, Nauru budget support from China. This contributed to a fiscal surplus of with the new port’s completion. The budget surplus may narrow to 30 percent of GDP. Prepayments were made into the Intergenera- 2 to 7 percent of GDP in the medium term due to increasing ex- tional Trust Fund, which was 152 percent of GDP in March 2024, up penditures on healthcare, education, and social benefits. The fis- from 111 percent in June 2022. Public debt (20.2 percent of GDP) cal responsibility policy was weakened in 2024 moving from requir- is sustainable. Liabilities have been significantly reduced. Poverty ing a surplus every year to a surplus across a 3-year rolling av- data has not been available for Nauru since 2012, but projections erage. In 2026, the East Micronesian Internet Cable could enable suggest an LMIC poverty rate of 15.3 percent in 2024. Nauru to offer online services, leveraging its favorable time zone between Asia and the Americas, English language proficiency, and Tuvalu’s growth is estimated at 3.5 percent in 2024, driven by Tuvalu widespread literacy. Additionally, a new port will provide transship- infrastructure projects, government consumption, and develop- ment opportunities and local value-addition to fishing products. ment partner assistance. Inflation slowed to 1.2 percent in 2024. The current account surplus narrowed from 10.7 percent in Tuvalu’s growth is expected to slow but remain 2.2 percent by Tuvalu 2023 to 4 percent in 2024 and the fiscal balance shifted to a 2027, driven by construction, hospitality, finance, and public ad- 3.9 percent GDP deficit due to declines in fishing license fees ministration. The 2023 Australia-Tuvalu Falepili Union Treaty is and grants. Public debt (6.3 percent of GDP) is sustainable, but expected to accelerate outward migration, increasing remittances at high risk of debt distress. Sovereign wealth funds increased over the medium term but reducing productivity and growth in to 245 percent at end-2024. Poverty data has not been available the long run. Inflation is projected to moderate to 3.1 percent for Tuvalu since 2010, but projections suggest an LMIC poverty by 2027 as global inflation pressures subside. Over the medium rate of 4.6 percent in 2024. A new poverty data point is expect- term, both the current account and fiscal deficits are expected ed by mid-2025. to widen as a result of weaker revenue. The value of sovereign wealth funds is expected to decrease, reaching 223 percent of GDP by 2027, subject to fluctuations in asset valuations and declining Outlook returns on investment. In Kiribati Kiribati, growth is expected to moderate to 3.9 percent in 2025 Risks to the Central Pacific outlook include trade shifts and as fiscal spending stabilizes and global trade slows. The fiscal deficit slowing global growth. Additionally, outwards migration and (15 percent of GDP) will be funded by reserves and the RERF. In volatile revenues, including grants from development part- 2026, growth may moderate further with trade policy uncertain- ners, pose significant challenges. Climate-related disasters ty. This could significantly more pronounced if financial markets further exacerbate these risks. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices Kiribati 4.6 2.7 5.2 3.9 3.0 2.2 Nauru 2.8 0.6 1.8 1.4 1.3 1.3 Tuvalu 0.4 3.9 3.5 2.8 2.3 2.2 Poverty rates of Kiribati 1,2 International poverty rate ($2.15 in 2017 PPP) 1.2 1.2 1.0 0.8 0.8 0.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 14.7 14.2 13.1 11.8 11.2 10.8 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 64.3 63.4 59.9 58.5 58.0 57.0 Source: Country authorities and World Bank, Poverty and Economic Policy Global Departments. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Nauru data are based on the fiscal year ended June. Kiribati and Tuvalu are calendar years. 1/ Calculations based on EAPPOV harmonization, using 2019-HIES. 2/ Projection using neutral distribution (2019) with pass-through = 1 (High) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 5 This outlook reflects information available as of April 10, 2025. 1 2 CHINA Population Poverty million millions living on less than $6.85/day 1407.6 240.6 3 4 Life expectancy at birth School enrollment Growth is projected to moderate from 5.0 percent in 2024 years primary (% gross) to 4.0 percent in 2025. Higher fiscal stimulus is expected to partly offset the negative growth impact of recent trade poli- 78.6 99.3 5 6 cy shifts. Poverty reduction, measured by the World Bank GDP GDP per capita poverty line for upper middle-income countries, is expected current US$, billion current US$ to continue at a slower pace with moderating growth. 18977.8 13482.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Domestic demand was soft in 2024, even as robust external China's growth moderated to 5.0 percent y/y in 2024, from 5.4 per- demand buoyed exports. Domestic demand weakness was cent in 2023. The property sector remains a key drag on economic driven by the prolonged property sector correction and low activity, with real estate investment contracting by 10.1 percent in consumer confidence. In response, the government progres- real terms last year, even as manufacturing and infrastructure in- sively increased monetary, fiscal, and property sector-related vestment grew by 9.9 percent. Overall investment contributed 1.3 policy support. Trade policy shifts and higher uncertainty are percentage points (ppts) to real GDP growth in 2024. Consumption expected to weigh on China’s exports, manufacturing invest- growth also weakened, with its contribution to growth declining ment, and domestic demand, with the impact partly offset from 4.6 ppts in 2023 to 2.2 ppts in 2024, as falling property prices by accommodative policies. and sluggish income growth weighed on consumer confidence. Ro- bust net exports, on the back of resilient external demand, con- China’s recent growth moderation has been in part driven by tributed 1.5 ppts to real GDP growth. structural factors such as slowing productivity growth, an aging population, high debt levels, and diminishing returns to capital. To address the growth slowdown, the government has ramped A key challenge for policymakers is to balance short-term sup- up policy support since September last year. The authorities low- port to stimulate growth against risks that the measures could ered key monetary policy rates and introduced a total of RMB exacerbate existing structural imbalances. Short-term policy in- 300 billion (0.2 percent of GDP) consumer trade-in and business terventions could be aligned with longer-term objectives such equipment upgrade fiscal subsidy programs. They also allowed as promoting greener growth and rebalancing the economy to- state-financed purchases of idle land and housing inventories ward higher consumption. while increasing liquidity support to viable property developers. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 9 40 100000 35 90000 7 80000 30 5 70000 25 60000 3 20 50000 15 40000 1 30000 10 -1 20000 5 10000 0 0 Private cons. Gov. cons. 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gross capital formation Net exports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: China National Bureau of Statistics and World Bank staff estimates. Source: Word Bank. Notes: See footnotes in table on the next page. 6 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Additionally, the government reduced mortgage rates and down while higher uncertainty could temper manufacturing investment. payment ratios and relaxed home purchase restrictions to stimu- Fiscal policy will be the main lever in mitigating the negative late housing demand. Partly driven by these counter-cyclical poli- impact of trade policy shifts and supporting GDP growth. A sig- cies, as well as stronger exports, growth picked up to 5.4 percent nificant portion of fiscal support is expected to be allocated to y/y in Q4 2024 from 4.6 percent in Q3. infrastructure investment, while some social benefits and the consumer subsidies will also be expanded. Policy support for Poverty reduction has kept pace with aggregate growth. In 2024, the property sector is expected to provide a modest boost to around 26 million people are estimated to have surpassed the con- housing demand, but stabilization in the sector is not anticipat- sumption threshold of US$6.85/day, a standard benchmark used ed until late 2025. as a reference by the World Bank to compare progress on poverty reduction across upper middle-income countries. This is lower Risks to the outlook are broadly balanced. Globally, uncer- than the estimated 29 million people who crossed the same tainty around trade policy and global growth poses risks to threshold in 2023, reflecting the growth slowdown. In real terms, China’s growth outlook. Domestically, prolonged weakness in per capita disposable income in urban areas grew at an annual av- the property sector could further curb investment and local erage rate of 4.1 percent between 2019 and 2024, while real per government revenues. Tighter local government financing, in capita consumption expenditure increased by only 3.5 percent, re- turn, could lead to under-execution of fiscal policies. On the flecting cautious household spending, especially in urban areas. upside, higher-than-expected fiscal spending could lift growth above baseline projections. Outlook Lower growth is also expected to weigh on the pace of poverty re- duction in 2025 and 2026. The poverty rate at the World Bank’s Growth is projected at 4.0 percent in both 2025 and 2026. The benchmark of US$6.85/day is projected to fall to 10.5 percent and growth moderation in 2025 will be driven by a decline in exports, 9.2 percent, respectively, in 2025 and 2026. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.1 5.4 5.0 4.0 4.0 3.9 Private consumption 1.7 9.0 4.3 4.9 4.8 4.7 Government consumption 5.3 7.3 3.3 6.8 6.3 3.7 Gross fixed capital investment 3.4 4.5 3.6 5.6 4.4 3.6 Exports, goods and services -1.9 1.1 11.5 -2.6 -1.1 2.0 Imports, goods and services -5.1 5.6 4.3 4.8 3.8 2.8 Real GDP growth, at constant factor prices 3.1 5.4 5.0 4.0 4.0 3.9 Agriculture 4.2 4.0 3.5 3.0 3.0 2.9 Industry 2.3 4.4 5.3 3.1 3.0 2.9 Services 3.6 6.3 5.0 4.8 4.8 4.7 Employment rate (% of working-age population, 15 years+) 62.0 62.3 62.3 62.2 62.1 62.1 Inflation (consumer price index) 2.0 0.2 0.2 0.5 1.3 2.0 Current account balance (% of GDP) 2.4 1.4 2.2 0.1 0.0 0.1 Net foreign direct investment inflow (% of GDP) -0.1 -0.8 -0.9 -3.0 -1.5 -1.0 1 Fiscal balance (% of GDP) -6.1 -5.5 -6.5 -8.7 -9.0 -8.6 Revenues (% of GDP) 31.7 31.7 30.3 28.9 28.5 28.0 Debt (% of GDP) 49.4 54.7 63.0 71.5 77.8 81.9 Primary balance (% of GDP) -5.1 -4.5 -5.5 -7.6 -7.8 -7.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 15.7 13.7 11.9 10.5 9.2 8.0 GHG emissions growth (mtCO2e) 1.6 2.5 2.3 1.8 2.0 2.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The adjusted fiscal balance adds up the public finance budget, the government fund budget, the state capital management fund budget and the social security fund budget. 2/ Last grouped data available to calculate poverty is for 2021 provided by NBS. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2021) with pass-through = 0.85 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 7 This outlook reflects information available as of April 10, 2025. 1 2 FIJI Population Poverty million millions living on less than $6.85/day 0.9 0.5 3 4 Life expectancy at birth School enrollment Growth is projected to slow to 3.2 percent GDP by 2027, years primary (% gross) due to sustained tourist arrivals. Fiscal consolidation is expected to support debt reduction. Risks to the outlook 68.3 107.6 5 6 include prolonged trade policy uncertainty, natural disas- GDP GDP per capita ters, skilled labor shortages, and external commodity price current US$, billion current US$ shocks. Investment, productivity, and fiscal consolidation structural reforms are essential risk mitigators, ensuring 5.6 5995.5 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. sustainable growth and poverty reduction. 4/ 2023. 5/ 2024. 6/ 2024. estimate that poverty fell to 50.1 percent in 2024, which is below Key conditions and challenges the pre-pandemic level of 52.6 percent measured in the 2019/ 20 Household Income and Expenditure Survey. Extreme poverty Fiji achieved upper-middle-income status in 2014 but continue to (US$2.15/day in 2017PPP) has almost been eliminated in Fiji, at 1.3 face challenges in raising living standards to match its income level. percent in 2019/20 and estimated at 1 percent in 2024. Tourism drives its economy, but its small size, remote location, im- port dependence, and climate vulnerability hinder development. To reach high-income status within 20 years, Fiji needs reforms to boost Recent developments investment and productivity. Key strategies include improving the business climate, fostering competition, attracting foreign invest- GDP growth of 3.8 percent is estimated for 2024, tapering off from ment, developing a skilled workforce, and promoting gender equality the strong recovery in 2022-2023 but higher than the 2014-2023 in employment while maintaining macroeconomic stability. average of 2.7 percent. This was attributed to robust tourist arrivals, which was 10 percent above pre-pandemic levels. Primary drivers of The economy recovered fully in 2023, but the legacy left behind by growth include tourism-related sectors such as accommodation, the pandemic combined with multiple disasters, particularly higher transport, financial services, and wholesale and retail industries. Av- debt, limits its ability to respond to future economic shocks. While erage inflation was 4.5 percent due to high prices during the year strong tourism is driving growth, capacity constraints in hotels, la- owing to the increase in minimum wages in August 2024. Monetary bor shortages, and bureaucratic obstacles are expected to hinder policy remains accommodative to support growth with the further progress. overnight policy rate maintained at 0.25 percent since 2020. Full economic recovery has bolstered Fiji’s poverty reduction ef- The current account deficit decreased to 4.2 percent of GDP in forts. Projections of poverty rates, as measured by the upper-mid- 2024, as tourism receipts and remittance inflows increased, partly dle-income country standard of living (US$6.85/day in 2017PPP), due to Fijians participating in various labor mobility schemes in FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 25 80 14000 20 70 12000 15 60 10 10000 50 5 8000 0 40 6000 -5 30 -10 4000 20 -15 10 2000 -20 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Agriculture Industry Services Real GDP Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance, IMF, and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 8 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Australia and New Zealand. Foreign reserves remained at a com- receipts and remittances. Remittances are expected to stay fortable level of 6 months of retained imports as of end-2024. above a tenth of GDP while tourism earnings moving close to a fifth of GDP. The current account deficit will be largely The fiscal deficit declined to 4 percent of GDP in 2024 from 4.6 financed by official borrowing. Foreign reserves are project- percent in 2023 due to high tax buoyancy from VAT and cor- ed to remain adequate over the medium term at above 5 porate income tax. Revenue gains from measures introduced in months of imports. This is slightly higher than IMF’s rec- 2024 such as departure tax and additional measures on VAT of ommended threshold of 4.9 months which is based on the 0.5 percent of GDP were partly offset by higher recurrent spend- Assessing Reserve Adequacy (ARA) metric for Fiji with high ing. The deficit was financed through external concessional and vulnerability to natural disasters. domestic borrowing. As a result, public debt fell from 81.5 per- cent in 2023 to 79.8 percent of GDP in 2024 owing to lower pri- The fiscal deficit is projected to decrease to 3.4 by 2027, driven mary balance and high growth. by ongoing and planned reforms that promotes revenue gener- ation and rationalization of expenditures. Key initiatives include strengthening compliance, rationalizing tax exemptions, and com- Outlook bating tax evasion and avoidance to boost revenue. Growth is expected to return to trend over the medium term with Initiatives to enhance expenditure management include a zero- 3.2 percent GDP by 2027. Tourist arrivals decreased by 3.8 percent based budgeting approach, review funding allocations for ex- compared to February of last year, but they are expected to re- tra-budgetary units, and focus on high-priority capital projects cover over the course of the year. While outmigration and labor over the medium term. Public debt is projected to decline to mobility have slowed, labor shortages are expected to persist with around 77.5 percent of GDP by 2027, backed by primary sur- growth supported by manufacturing, wholesale and retail trade, pluses. The public debt is considered sustainable but subject and finance sectors. Howvever, it is difficult to gauge the full impact to considerable risks. of recent measures as policy shifts may continue to unfold. The outlook is subject to downside risks, primarily stemming from The growth outlook is projected to reduce poverty to 48.7 percent ongoing global trade policy uncertainty, skilled labor shortages, po- in 2025 and 45.5 percent by 2027 by UMIC standards. Headline in- tential international price shocks, and natural disasters. To mitigate flation is projected to decrease to return to trend to 3 percent over these risks and foster sustainable growth, it is essential to imple- the medium term. ment structural reforms that support investment and productivity, including fiscal consolidation measures. These efforts will be crit- The current account deficit is expected to subside to 2.1 percent ical in enhancing resilience, maintaining macroeconomic stability, of GDP by 2027, driven by reduced trade deficit and stable tourism and supporting poverty reduction. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 19.8 7.5 3.8 2.6 2.9 3.2 Real GDP growth, at constant factor prices 16.0 9.1 3.8 2.6 2.9 3.2 Agriculture 4.0 4.7 1.8 4.5 4.5 4.1 Industry 8.3 -4.9 7.3 2.7 4.5 6.1 Services 20.7 13.9 3.3 2.3 2.2 2.4 Inflation (consumer price index) 3.1 5.1 1.3 3.3 3.1 3.0 Current account balance (% of GDP) -17.3 -7.7 -4.2 -3.2 -3.2 -2.1 Net foreign direct investment inflow (% of GDP) 1.8 1.1 4.2 4.7 5.1 5.0 Fiscal balance (% of GDP) -10.3 -4.6 -4.0 -4.3 -3.7 -3.4 Revenues (% of GDP) 21.7 25.2 28.4 28.4 28.1 28.1 Debt (% of GDP) 85.8 81.5 79.8 79.7 78.8 77.5 Primary balance (% of GDP) -6.6 -0.5 0.0 -0.4 0.2 0.5 1,2 International poverty rate ($2.15 in 2017 PPP) 1.8 1.3 1.0 0.9 0.8 0.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 14.7 12.3 11.4 11.0 10.4 9.7 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 57.1 52.4 50.1 48.7 47.3 45.5 GHG emissions growth (mtCO2e) 19.8 7.5 4.1 3.1 3.0 3.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2019-HIES. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 9 This outlook reflects information available as of April 10, 2025. 1 2 INDONESIA Population Poverty million millions living on less than $3.65/day 285.1 44.3 3 4 Life expectancy at birth School enrollment Growth remains resilient, poverty and unemployment fell, years primary (% gross) but middle-class job creation lags. Global and domestic poli- cy uncertainties triggered portfolio outflows, pressuring the 68.2 100.2 5 6 Rupiah. Growth is projected to average 4.8 percent through GDP GDP per capita 2027, but uncertainty in trade policy could impact invest- current US$, billion current US$ ment and growth. Structural reforms to accelerate produc- tivity growth, alongside fiscal and monetary prudence, are 1396.3 4897.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2024 (2017 PPPs). 3/ 2022. key to advancing the government’s growth agenda. 4/ 2023. 5/ 2024. 6/ 2024. estimated at 6.4 percent of GDP. Closing this gap will expand the Key conditions and challenges fiscal space for funding Indonesia’s Vision 2045. Indonesia achieved upper middle-income status in 2023 and aims for high-income status by 2045. To reach this goal, Indonesia must Recent developments accelerate its growth to at least 6 percent. The Government is tar- geting 8 percent by 2029 through higher investment. While ro- GDP growth in 2024 was maintained at 5.0 percent due to strong bust demand has supported steady economic performance and domestic demand. Election-related spending increased public con- brought poverty down, accelerating growth requires implementing sumption, offsetting the weaker contribution of net exports to structural reforms to boost the country’s growth potential and mit- growth from falling commodity prices. Service sectors drove igate overheating risks. growth, while tradeable manufacturing, especially textiles slowed, leading to a 20.2 percent rise in job cuts. Leading indicators point Despite strong macroeconomic foundations, Indonesia is experi- to a potential moderation in domestic demand in early 2025. encing a slowdown in productivity growth. Structural constraints are impeding a more efficient allocation of resources to the most Inflation eased in the second half of 2024, thanks to a rebound in productive sectors, leading to a continuous decline in total factor agricultural production and price stabilization through fiscal mea- productivity growth, from 2.3 to 1.2 percent between 2011 and sures. On average, yearly inflation declined to 2.3 percent in 2024, 2024. To address this issue, Indonesia could advance efficiency re- from 3.7 percent in 2023. Temporary electricity subsidies in early forms, including through financial sector deepening and improving 2025 have kept inflation low at 1 percent in March. the investment, trade, and business climate. Wages increased by 3.3 percent in 2024, outpacing inflation, with At 12.7 percent, Indonesia’s 2024 revenue-to-GDP is the lowest strong gains in the agriculture sector. The real wage increase among middle-income peer countries. Foregone tax revenues are brought the poverty rate down by 1.9 ppts to 15.6 percent using FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 6 100 60 90 4 50 80 70 2 40 60 50 30 0 40 20 -2 30 20 10 -4 10 2020 2021 2022 2023 2024 2025 2026 2027 0 0 Statistical discrepancy Net exports 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Investment Government consumption International poverty rate Lower middle-income pov. rate Private consumption GDP Upper middle-income pov. rate Real GDP pc Sources: National Statistics Agency and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 10 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. the lower middle-income country (LMIC) poverty line. Lower food confidence. While it is difficult to gauge the full impact of inflation eased the burden on households and contributed to re- recent measures as policy shifts may continue to unfold, ducing poverty. Unemployment fell to 4.8 percent in February growth is projected to moderate to an average of 4.8 per- 2024, below pre-pandemic levels. However, the creation of quality cent over 2025-2027. The announced demand stimulus cou- jobs has lagged, as underemployment recorded 8.5 percent in Feb- pled with planned reforms to boost the capacity of the econ- ruary 2024, a 1.5 ppts increase from the previous year. omy could counterbalance this impact. Capital formation is expected to gradually rise as investments through Danan- The government revised its decision to raise the value-added tax in tara materialize. Private consumption growth will remain 2025, opting instead to optimize the budget through partial spend- resilient, with some moderation as the lack of quality jobs ing cuts. These cuts are being redirected to priority programs and raises precautionary savings. With sustained demand, the the establishment of a new sovereign wealth fund (Danantara), poverty rate, measured at the LMIC line, is projected to maintaining overall spending neutrality. However, tax revenues decline to 11.5 percent by 2027. A positive output gap will contracted by 0.4 ppts, reaching 1.1 percent of GDP in February fuel inflation, which is expected to remain within Bank In- amid moderating commodity prices and technical disruptions in donesia’s target band. the Core Tax Administration System. This led to a fiscal deficit of 0.1 percent of GDP during this period. Spending is projected to accommodate new priority programs, raising the fiscal deficit to 2.7 percent of GDP. Expenditure will shift The current account deficit increased to 0.6 percent of GDP in 2024 further towards social expenditures, including the new Nutritious as terms-of-trade softened. Portfolio equity outflows accelerated Food Program. Debt will stabilize at around 41 percent of GDP, with since February amid global and domestic policy uncertainties. Con- higher borrowing costs pushing interest payments to 19 percent of currently, increased domestic demand for USD, driven by exter- total revenues. nal debt repayments and dividend outflows put additional pres- sure on the Rupiah, which depreciated by 2.3 percent year-to- Amid restrictive global financial conditions and trade policy March. However, the implementation of the mandatory repatria- measures, the current account deficit is projected to widen to tion rule for natural resource export proceeds has partially offset 1.7 percent of GDP by 2027 below pre-pandemic levels. For- the pressure on foreign exchange reserves, which rose and now eign direct investment will remain the main source of external cover 6.7 months of imports. funding, mostly directed towards industrial downstreaming, but will pick up gradually over time as foreign investors seek more policy stability. Outlook Risks to the outlook are skewed to the downside. Trade policy un- Uncertainty over global trade policies and a drop in commodi- certainty, weaker commodity prices, and domestic policy uncer- ties prices will impact Indonesia’s terms-of-trade and investors’ tainties could pose challenges to growth. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.3 5.0 5.0 4.7 4.8 5.0 Private consumption 5.0 4.9 5.1 4.9 4.9 4.9 Government consumption -4.4 3.0 6.6 -2.1 0.3 0.9 Gross fixed capital investment 3.9 3.8 4.6 6.1 6.2 6.3 Exports, goods and services 16.2 1.3 6.5 4.8 5.1 5.5 Imports, goods and services 15.0 -1.6 7.9 4.5 5.0 5.1 Real GDP growth, at constant factor prices 4.9 5.1 5.1 4.7 4.8 5.0 Agriculture 2.3 1.3 0.7 3.6 3.0 3.0 Industry 4.1 5.0 5.2 3.8 4.0 4.0 Services 6.5 6.1 6.2 5.7 5.9 6.3 Employment rate (% of working-age population, 15 years+) 64.6 65.8 67.2 67.3 67.7 68.5 Inflation (consumer price index) 4.1 3.7 2.3 2.3 2.6 2.6 Current account balance (% of GDP) 1.0 -0.1 -0.6 -1.3 -1.6 -1.7 Net foreign direct investment inflow (% of GDP) 1.4 1.1 1.0 1.2 1.3 1.5 Fiscal balance (% of GDP) -2.4 -1.6 -2.3 -2.7 -2.7 -2.7 Revenues (% of GDP) 13.5 13.3 12.8 11.9 12.3 12.4 Debt (% of GDP) 39.5 39.0 39.2 40.1 40.8 41.4 Primary balance (% of GDP) -0.4 0.5 -0.1 -0.4 -0.4 -0.3 1,2 International poverty rate ($2.15 in 2017 PPP) 2.2 1.8 1.3 1.0 0.8 0.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 19.1 17.5 15.6 14.2 12.8 11.5 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 62.6 61.8 60.3 58.7 57.2 55.5 GHG emissions growth (mtCO2e) 2.9 2.5 3.1 2.9 3.0 0.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2011-SUSENAS and 2024-SUSENAS. Actual data: 2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2011-2024) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 11 This outlook reflects information available as of April 10, 2025. 1 2 LAO PDR Population Poverty million millions living on less than $3.65/day 7.8 2.3 3 4 Life expectancy at birth School enrollment Despite steady growth and improved macroeconomic condi- years primary (% gross) tions in 2024, high debt continues to limit fiscal space, and the poverty rate stagnated. For 2025, growth is forecast at 69.0 96.8 5 6 3.5 percent, amid rising trade policy uncertainty. Without GDP GDP per capita sustained reforms in revenue, governance, financial stability, current US$, billion current US$ and the business environment, risks to growth and stability are substantial. The poverty rate is projected at 31 percent. 15.4 1977.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Macroeconomic imbalances persist despite recent improvements. In 2024, economic imbalances improved. Laos' economic Public and publicly guaranteed debt (PPG) remains unsustainable growth remained steady, driven by sectors like tourism, at 116 of GDP, including domestic arrears and a currency swap. transport, electricity, mining, agriculture, and manufacturing. From 2020-2023, cumulative external debt service deferrals The average official kip/US$ exchange rate depreciated by amounted to approximately 16 percent of GDP, reducing short- 8 percent year-on-year during July 2024 to February 2025, term pressure on foreign exchange demand but leaving long term while the parallel rate weakened by 1 percent. Indicating re- solvency issues unresolved. External debt repayments are project- duced pressures, the gap between the official and parallel rates ed to average $1.3 billion annually from 2025 to 2027 if there are narrowed to below 1 percent in January. This improvement was no further deferrals. This results in high financing needs, which im- mainly due to tighter monetary policy, increased foreign re- plies a high foreign exchange liquidity risk. serves, stricter foreign exchange management, and fiscal con- solidation, with some debt service deferrals in 2024. Inflation Macroeconomic instability has also had a significant impact on the moderated to 15.5 percent in January 2025, down from 26.2 labor market, household living standards, and human capital de- percent in mid-2024. velopment. High inflation, currency depreciation, and declining re- al wages have driven many workers’ transitions from wage em- Stronger revenue collection offset increased spending in 2024, ployment and unpaid family work to self-employment, while also resulting in a fiscal surplus. Domestic revenue increased to 17.6 increasing outmigration to neighboring countries. The prolonged percent of GDP due to higher VAT, profit taxes, export duties, and inflation has forced over one-third of households to reduce food natural resource taxes, driven by improved economic activity, a consumption and investments in human capital, and limit savings. tax rate increase, and better tax administration. Public spending These pressures pose serious challenges for poverty reduction. rose to 16.7 percent due to higher interest payments. Investment FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 8 90 25 80 6 70 20 4 60 15 50 2 40 10 30 0 20 5 -2 10 2016 2017 2018 2019 2020 2021 2022 2023 2024 0 0 Agriculture Industry 2012 2014 2016 2018 2020 2022 2024 2026 Services Net taxes on production International poverty rate Lower middle-income pov. rate Real GDP growth Upper middle-income pov. rate Real GDP pc Sources: Lao Statistics Bureau and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 12 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. in human capital and infrastructure maintenance remains limited restoration of fuel excise rates) and better administration. High (2.1 percent in 2024 plan). interest obligations could crowd out other essential expenditures. The baseline assumes a primary surplus in coming years, but an The overall balance of payments improved in 2024, supported by a overall fiscal deficit. current account surplus and net financial inflows, helping replenish reserves. Exports, particularly in agriculture, mining, electricity, and Inflation is expected to moderate but remain in the double digits, electronics, continued to grow. Despite improvement, foreign re- reflecting potential depreciation due to high external debt service serves excluding the currency swap, remain precariously low, cov- and imports. ering 1.3 months of imports. Macroeconomic volatility will continue to pose a risk to poverty re- Employment continued to shift from wage and unpaid family jobs duction efforts. High inflation will continue to pressure real house- to self-employment, along with rising outmigration, leading to la- hold incomes and human capital spending. Extreme weather bor shortages in some sectors. The share of self-employment rose events could exacerbate food price increases while reducing farm from 40 percent in 2023 to 59 percent in 2024. Official migration income. The poverty rate is projected to remain steady in 2025. In to Thailand increased from 233,132 to 291,844, while migration the medium term, a contraction in human capital spending could to South Korea doubled from 2,815 to 5,602. Nominal wages and undermine poverty reduction efforts. household income grew by 8 percent and 14 percent, respectively, but lagged inflation. Due to high inflation, half of households re- This outlook faces significant risks. Global trade uncertainty could duced food consumption and one-third cut back on human capital impact external demand and investments from Laos’ key trading investments. The poverty rate (based on the lower-middle-income partners. Domestically, tight foreign exchange liquidity, limited ac- poverty line in 2017 PPP) was estimated at 31 percent in 2024. cess to international capital markets, slow structural reforms, and deteriorating bank balance sheets pose challenges. With low ac- cess to international capital markets, the pressure on domestic fi- Outlook nancing sources could intensify. Outmigration and labor shortages could hinder growth in labor-intensive sectors. Heightened trade policy uncertainty could impact Laos growth in the short term. Real GDP growth is projected to moderate at 3.5 Addressing macroeconomic instability requires five critical re- percent as trade policy shifts and the resulting decline in for- forms: (i) improving revenue mobilization (curbing tax exemptions, eign demand could impact some of the export-oriented manufac- restoring fuel excise rates, and reforming health taxes); (ii) improv- turing and services. Despite improvements in revenue collection ing governance of public and public-private investments; (iii) final- and deferrals, high debt service will continue to constrain fiscal izing debt negotiations; (iv) strengthening financial sector stability; space. Revenue is expected to benefit from tax policy (such as the and (v) improving the business environment. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.7 3.7 4.1 3.5 3.4 3.4 Real GDP growth, at constant factor prices 2.7 3.7 4.1 3.5 3.4 3.4 Agriculture 1.6 2.4 3.0 2.9 2.8 2.8 Industry 3.3 2.6 3.7 2.5 2.5 2.5 Services 2.5 5.5 5.0 4.7 4.5 4.4 Inflation (consumer price index) 22.7 31.2 23.3 11.0 9.8 7.0 Current account balance (% of GDP) -1.7 2.6 1.6 -0.5 -1.7 -2.0 Fiscal balance (% of GDP) -0.2 0.7 0.8 -0.5 -0.4 -0.5 Revenues (% of GDP) 14.7 16.5 18.2 18.1 18.1 18.2 Debt (% of GDP) 130.9 115.9 112.2 112.2 110.3 108.8 Primary balance (% of GDP) 1.3 2.7 3.9 2.8 2.7 2.5 1,2 International poverty rate ($2.15 in 2017 PPP) 6.8 6.7 6.5 6.4 6.3 6.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 31.7 31.4 31.0 30.7 30.4 30.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 69.7 69.3 68.9 68.5 68.2 67.8 GHG emissions growth (mtCO2e) 3.8 4.9 5.6 5.5 5.6 6.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2012-LECS and 2018-LECS. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2012-2018) with pass-through = 0.7 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 13 This outlook reflects information available as of April 10, 2025. 1 2 MALAYSIA Population Poverty million millions living on less than $6.85/day 35.6 0.8 3 4 Life expectancy at birth School enrollment Malaysia’s economy grew robustly in 2024, driven by private years primary (% gross) consumption, strong investments, and a rebound in exports. In 2025, growth is projected to slow to 3.9 percent amid a 76.3 98.8 5 6 challenging global environment. Fiscal constraints and in- GDP GDP per capita come inequality remain key challenges. Structural reforms to current US$, billion current US$ enhance fiscal capacity, increase incomes, and promote so- cial mobility are essential for navigating global challenges 422.0 11867.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. and ensuring long-term, inclusive growth. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Malaysia's economy registered strong growth in the last two Malaysia sustained strong economic growth of 5 percent in 4Q quarters of 2024. This expansion was underpinned by re- 2024, bringing overall growth for the year to 5.1 percent. House- silient private consumption, robust investment, and a re- hold consumption remained resilient, driven by sustained employ- bound in exports. However, limited fiscal space remains a ment and wage growth, as well as government income support key challenge for the government, with low tax revenue and measures. Private and public investment expanded strongly, dri- high rigid expenditures. While optimizing public spending ven by capital expenditure in the manufacturing and services sec- can free up budgetary resources, enhancing revenue mobi- tors. Meanwhile, net export growth turned positive amid continued lization remains vital to restore fiscal space and meet future export expansion and slower import growth but was offset by larg- fiscal needs. er inventory drawdowns which weighed on overall growth. The services sector led expansion while manufacturing grew on the Malaysia has made significant progress in reducing poverty. strength of the electrical and electronic (E&E) exports. Agriculture Measured using the international upper-middle income line and mining contracted due to unfavorable weather conditions and of $6.85 (2017 PPP) dollars per day, poverty stood at 2.3 a continued decline in oil output. Construction saw strong growth, percent in 2021 and projected to decline further to 1.2 per- driven by non-residential and specialized projects. cent in 2025. However, income remains highly concentrated at the top, with the richest 20 percent of households hold- Headline inflation has eased to 1.9 percent in Q3 2024 and 1.8 per- ing 41 percent of total income in 2022. Meanwhile, income cent in Q4 2024. This moderation was primarily due to lower infla- mobility remains limited at the bottom, with more than half tion in mobile communication services, though partially offset by of those in the poorest 20 percent remaining in the same higher food prices. Core inflation followed a similar trend, standing income decile. at 1.9 percent in Q3 2024 and 1.7 percent in Q4 2024. The labor FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 30 25 35000 20 30000 20 25000 10 15 20000 0 10 15000 -10 10000 5 5000 -20 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real priv. cons. pc Sources: Bank Negara Malaysia and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 14 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. market continues to show positive trends, with the national unem- Headline inflation is projected to increase to 2.6 percent, reflecting ployment rate remaining at 3.2 percent while nominal wage growth several domestic policy reforms amid moderating cost conditions saw a slight uptick. The central bank maintained the overnight pol- mainly due to lower commodity prices. icy rate at 3 percent and deemed that the monetary policy stance remains supportive of the economy, with inflation expected to re- The growth outlook is subject to several significant downside main manageable in 2025. risks, primarily driven by the increased uncertainty around trade and investment. These developments may exacerbate The government has implemented several new measures to en- trade fragmentation, contribute to further uncertainty, and hance wage growth and support workers amidst rising living lead to a more pronounced deceleration in global economic costs. In February 2025, the monthly minimum wage was in- growth. The impact of commodity price declines may com- creased by 13.3 percent from RM1,500 to RM1,700, benefitting pound the potential effects of trade uncertainty. Domestic risks approximately 4.37 million workers. The government has also al- to Malaysia’s growth stem from inflationary pressures from do- located RM200 million under the Progressive Wage Policy in Bud- mestic policy measures and potential supply disruptions from get 2025, aiming to support 50,000 workers by linking wages to unfavorable weather conditions. productivity and experience. Without further efforts to address inequality and enhance eco- nomic mobility, over half of Malaysians may continue to have Outlook incomes below the high-income threshold even when Malaysia attains high-income country status. Addressing these issues re- In 2025, Malaysia’s growth is projected to moderate to 3.9 percent quires comprehensive measures to promote inclusive growth amid heightened global economic policy uncertainty, especially re- and enhance mobility, including boosting productivity, prioritizing garding trade policy. Growth will be driven mainly by domestic de- quality education and skills training, and increasing investment mand, with private consumption supported by government mea- in human capital development early in the lifecycle. Strengthen- sures. While external challenges are likely to impact investment de- ing social protection through increased spending, improved tar- cisions, private investment is expected to remain supported by on- geting, and reduced fragmentation is also crucial. Additionally, fi- going multiyear investments and the implementation of previous- nancing inclusive investments by expanding health and education ly approved projects. Exports will face considerable external head- investments and creating more fiscal space for equity-enhancing winds arising from the deterioration in the global environment. initiatives is essential. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 8.9 3.6 5.1 3.9 4.3 4.3 Private consumption 11.3 4.7 5.1 4.7 4.8 5.0 Government consumption 5.1 3.3 4.7 4.7 4.3 3.4 Gross fixed capital investment 6.8 5.5 12.0 4.2 4.2 4.0 Exports, goods and services 14.5 -8.1 8.5 2.3 3.5 3.7 Imports, goods and services 16.0 -7.4 8.9 3.2 3.9 4.0 Real GDP growth, at constant factor prices 8.9 3.5 5.1 3.9 4.3 4.3 Agriculture 1.3 0.7 3.1 1.9 1.8 1.6 Industry 6.7 1.3 4.9 2.8 3.2 3.2 Services 11.4 5.2 5.5 4.9 5.3 5.3 Employment rate (% of working-age population, 15 years+) 62.9 62.7 62.7 62.7 62.6 62.6 Inflation (consumer price index) 3.4 2.5 1.8 2.6 2.5 2.5 Current account balance (% of GDP) 3.2 1.5 1.7 1.7 1.7 1.7 Net foreign direct investment inflow (% of GDP) 0.7 0.0 0.6 0.5 0.5 0.4 Fiscal balance (% of GDP) -5.5 -5.0 -4.1 -3.8 -3.4 -3.1 Revenues (% of GDP) 16.4 17.3 16.8 16.5 16.5 16.2 Debt (% of GDP) 60.2 64.3 64.6 65.0 64.5 64.0 1 Primary balance (% of GDP) -3.2 -2.5 -1.5 -1.2 -0.9 -0.8 2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.1 0.0 0.0 0.0 0.0 0.0 2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 1.6 1.5 1.3 1.2 1.1 1.0 GHG emissions growth (mtCO2e) 3.3 -1.0 1.1 1.3 1.3 0.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The primary balance excludes interest payments received. 2/ Projection using annualized elasticity (2013-2021) with pass-through = 0.7 based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 15 This outlook reflects information available as of April 10, 2025. 1 2 MONGOLIA Population Poverty million millions living on less than $6.85/day 3.5 0.8 3 4 Life expectancy at birth School enrollment Despite global uncertainty, Mongolia's GDP is projected to years primary (% gross) grow by 6.3 percent in 2025, driven by a surge in copper production and a partial recovery of agriculture from a harsh 72.7 95.8 5 6 winter. The poverty rate is expected to decrease modestly GDP GDP per capita from 20.2 percent in 2024 to 19.2 percent in 2025, driven by current US$, billion current US$ income gains but limited by inflation and lingering impacts of agricultural losses. While favorable, the outlook is subject to 23.6 6695.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. sizable uncertainty amid shifting global trade policies. 4/ 2023. 5/ 2024. 6/ 2024. heating, which have been only partly offset by rising wages. Mean- Key conditions and challenges while, the agricultural contraction triggered by the harsh winter challenges rural livelihoods. As a result, poverty reduction is pro- The economy continues to benefit from a mining boom, con- jected to be modest, with the rate declining from 20.2 percent in tributing to strong growth, fiscal surpluses, and public debt 2024 to 19.2 percent in 2025 using the $6.85 line. reduction. However, rapid wage growth, increased fiscal and quasi-fiscal spending, and higher credit growth have boosted domestic demand, increasing inflation and imports. While fiscal Recent developments buffers have improved, strong import demand has contributed to a wider current account deficit and greater vulnerability to Economic growth reached 5.0 percent in 2024, driven by strong external shocks. The 2025 budget’s focus on a structurally bal- mining and services. Coal output hit a record high, while copper anced stance marks a positive shift from recent highly pro- production at Oyu Tolgoi (OT), the largest copper mine, surged un- cyclical policies. However, large SOE-financed investment pro- derground mining expanded. However, growth slowed from 7.2 jects and dividend transfers to the public present continued percent in 2023 due to a sharp contraction in agriculture following quasi-fiscal expansion. the dzud that led to a 15 percent reduction in agricultural incomes in 2024. On the demand side, rising incomes from wage and pen- Mongolia introduced energy tariff reforms that are expected to en- sion hikes and higher public spending boosted consumption. Low- hance the sector's financial sustainability and, if coupled with addi- er inflation earlier in the year and increased household borrowing tional investments and service improvements, to reduce blackouts further supported private spending. Investment was also strong, and inefficiency. Higher energy efficiency would boost productivity, driven by foreign direct investment (FDI), public capital expendi- investment, and growth over the medium term. But, in the short tures, and recovering bank lending. However, strong domestic de- term the tariff hikes have contributed to increased living costs, es- mand promoted imports, particularly consumer durables and in- pecially for residents of urban ger districts reliant on electricity for vestment goods, weighing on net exports. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 25 60 12 20 50 10 15 10 40 8 5 30 6 0 -5 20 4 -10 10 2 -15 -20 0 0 2022 2023 2024 p 2025 f 2026 f 2027 f 2010 2012 2014 2016 2018 2020 2022 2024 2026 Final consumption Gross capital formation International poverty rate Lower middle-income pov. rate Net exports GDP growth Upper middle-income pov. rate Real GDP pc Sources: National Statistics Office and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 16 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Headline inflation averaged 6.8 percent in 2024, down from 10.4 copper production at OT as its underground mining operations percent in 2023 due to lower global food and fuel prices. However, expand. After two years of dzud-related losses, the agriculture inflation had surged to 9.0 percent by year-end, exceeding the cen- sector is also expected to recover moderately. However, private tral bank’s target range of 4–8 percent, driven by supply and de- consumption is anticipated to slow, reflecting rising inflation and mand pressures. The November 2024 energy tariff reform raised a gradual recovery in rural livelihoods—resulting in only a mod- household electricity prices, directly adding 1.4 percentage points est reduction in poverty in 2025. Private investment growth is to inflation and reducing purchasing power. Higher electricity costs also expected to soften due to declining FDI—partly from the also led manufacturers to raise prices. Meanwhile, core inflation tapering of OT-related investment and heightened global uncer- (excluding food and fuel) jumped by 2.7 percentage points in the tainty—along with higher domestic lending rates as the central second half of 2024, reflecting growing demand pressures. In re- bank continues efforts to contain inflation, and rising production sponse, the central bank tightened monetary conditions in Decem- costs, particularly energy. While the direct impact of recent trade ber 2024 and again in January and March 2025 by raising the policy policy shifts is expected to be limited—given Mongolia’s mini- rate and the banks’ reserve requirements. mal trade exposure to the U.S.—the indirect effects of slowing global growth, declining coal and copper prices, and substan- Despite record revenues in 2024, the budget surplus narrowed tial OT-related investment repayments are expected to weigh on due to high fiscal spending. Still, strong GDP growth and the fiscal fiscal revenues and external balances. Still, strong GDP growth surplus led to a decline in the public debt-to-GDP ratio. The im- and higher inflation will contribute to a reduction in the public proved fiscal situation led to sovereign credit rating upgrades. debt-to-GDP ratio. Short-term debt risks eased a partial refinancing of a Eurobond maturing in 2026. Growth is projected to average 5.2 percent in 2026–27, with a sus- tained agricultural recovery, strong industrial expansion, rising in- Surging imports and declining mineral prices resulted in a current comes and high capital spending. As a result, poverty is expected account deficit of 9.3 percent of GDP in 2024, despite strong ex- to decline to 17.8 percent by 2027, though rising cost-of-living pres- ports. However, increased FDI and external bond issuance helped sures may slow further progress. maintain reserves at $5.0 billion (3.4 months of imports) in March 2025, even as the central bank repaid US$622 million of its curren- Risks remain balanced. On the downside, global trade shifts and cy swap line with the People’s Bank of China. uncertainty could dampen global growth, reduce external demand for Mongolia’s key commodities, and exert downward pressure on prices, with adverse implications for exports, fiscal revenues, and Outlook investor sentiment. On the upside, faster completion of key cross- border infrastructure projects could facilitate Mongolian mineral Despite heightened uncertainty stemming from major shifts in exports. Stronger-than-expected fiscal stimulus in China to offset global trade policy, Mongolia’s economy is projected to grow by 6.3 tariff impacts and a quicker resolution of its property sector chal- percent in 2025, largely driven by a projected 70 percent surge in lenges would further support demand for Mongolia’s exports. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.0 7.2 5.0 6.3 5.2 5.2 Private consumption 8.1 9.7 12.9 2.0 8.6 6.8 Government consumption 6.9 3.2 18.4 1.7 5.3 2.4 Gross fixed capital investment 13.2 5.3 19.7 2.0 2.0 4.3 Exports, goods and services 32.3 33.2 0.7 11.4 5.9 2.6 Imports, goods and services 29.1 18.9 17.7 4.1 6.8 3.8 Real GDP growth, at constant factor prices 4.2 7.5 4.9 6.3 5.2 5.2 Agriculture 12.0 -8.9 -28.7 19.0 12.0 6.0 Industry -4.5 12.9 6.5 9.9 5.9 5.3 Services 6.9 9.9 12.7 2.4 3.5 5.0 Inflation (consumer price index) 15.2 10.4 6.8 10.0 8.0 7.5 Current account balance (% of GDP) -13.2 0.6 -9.3 -12.1 -11.4 -11.5 Net foreign direct investment inflow (% of GDP) 13.9 10.6 10.7 7.8 7.5 6.9 Fiscal balance (% of GDP) 0.7 2.6 1.3 -1.1 -1.5 -1.1 Revenues (% of GDP) 33.8 34.3 39.2 35.8 35.4 35.0 1 Debt (% of GDP) 62.0 44.4 43.3 39.3 36.5 33.9 Primary balance (% of GDP) 1.8 4.0 2.6 0.1 -0.5 0.0 2,3 International poverty rate ($2.15 in 2017 PPP) 0.2 0.2 0.2 0.2 0.2 0.2 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.4 2.1 1.9 1.7 1.5 1.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 22.1 20.9 20.2 19.2 18.5 17.8 GHG emissions growth (mtCO2e) 4.7 1.8 -1.1 3.0 3.9 4.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Debt excludes the BoM's liability under the PBOC swap line (3.8% of GDP as of the end of 2024). 2/ Calculations based on EAPPOV harmonization, using 2016-HSES, 2018-HSES, and 2022-HSES. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 3/ Projection using annualized elasticity (2016-2018) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 17 This outlook reflects information available as of April 10, 2025. 1 2 MYANMAR Population Poverty million millions living on less than $3.65/day 54.5 10.2 3 4 Life expectancy at birth School enrollment Natural disasters, conflict, and macroeconomic volatility years primary (% gross) impacted Myanmar's economy. Exchange rate fluctuations, import restrictions, and power outages caused shortages 67.3 118.9 5 6 and rising prices. GDP contracted by 1 percent in the year GDP GDP per capita ending March 2025, 11 percent below FY2018/19 levels. The current US$, billion current US$ economy is projected to grow by 1.5 percent in FY2025/26, down from an earlier forecast of 2 percent, with further 66.8 1224.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2017 (2017 PPPs). 3/ 2022. adjustments possible due to earthquake impacts. 4/ 2018. 5/ 2024. 6/ 2024. currency depreciation and shortages attributable to conflict-re- Key conditions and challenges lated trade disruptions and stricter import licensing. The most re- cent consumer price inflation data shows 25.4 percent inflation in Myanmar's economy has faced significant challenges in recent March 2024 (YoY) driven by food prices. The World Food Program months. On March 28, a 7.7-magnitude earthquake struck central food price index rose 60 percent from April to December 2024, and Myanmar, resulting in significant loss of life, widespread damage to fuel prices increased by 12 percent. Attempts to impose price con- buildings and essential energy, water, and transport infrastructure, trols have exacerbated shortages of some products. As of Octo- and severe disruptions to health services. Meanwhile, large-scale ber 2024, 14.3 million people (25 percent of the population) faced labor movements have been driven by conflict, weak economic acute food insecurity, up from 10.7 million the previous year. conditions, disasters, and fears of military conscription, leading to significant internal displacement and exacerbating shortages of workers in some areas. Power generation has also declined in re- Recent developments cent months, reportedly meeting only 50 percent of demand from businesses and households as of mid-March. The earthquake has Real GDP is estimated to have contracted by 1 percent in the exacerbated these shortages, including in Yangon. Night light lumi- year ending March 2025. Typhoon Yagi and flooding negatively im- nosity in industrial zones decreased by 7 percent in 2024, and by 24 pacted crop production while raw material shortages, weak do- percent in non-industrial areas. States like Rakhine, Chin, Kachin, mestic demand, power outages, and labor supply constraints con- and Kayin saw reductions of over a third. strained manufacturing and services activity. The manufacturing purchasing manager's index has been in contractionary territory Macroeconomic volatility and an unpredictable policy environ- since July 2024, except for December, reflecting a decrease in new ment continue to weaken economic activity. In addition, recent orders and raw material shortages. Imports of construction ma- international trade policy shifts are likely to affect Myanmar’s terials from China have also declined, and public infrastructure exports in the coming months. Inflation remains high due to projects have been delayed. The World Bank Firm Survey from FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Manufacturing Purchasing Manager's Index by sector Percent, percentage points Index 10 70 60 5 50 0 40 -5 30 20 -10 10 -15 2018 2019 2020 2021e 2022e 2023e 2024e 2023f 2024f Agriculture Industry Services Real GDP growth Headline Output Employment Sources: Ministry of Planning and Finance, and World Bank staff estimates. Source: S&P Global Market Intelligence. 18 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. September/October 2024 indicates worsening firm sales and prof- Poverty is estimated to have risen to 32 percent in 2023/24 due to itability, with sales declining by 18 percent in October compared to conflict, natural disasters, high inflation, and negative labor market the same period in the previous year, while profits fell by 25 per- trends. Mandalay and Sagaing, the epicenter of the recent earth- cent. Domestic air travel and international arrivals have dropped quake, had high poverty rates of 50.1 percent and 37.1 percent, re- due to insecurity and conflict, and mineral production has declined spectively, and are now dealing with increased household vulnera- as key mining areas are affected by conflict. bility and hardship due to fatalities and destruction of property. A sharp drop in imports has narrowed the current account and trade deficits to 1.2 and 2.2 percent of GDP, respectively, in FY2024/ Outlook 25. Manufacturing exports fell due to reduced natural gas produc- tion and lower demand for garments from the EU. However, agri- The outlook remains bleak, with the earthquake likely to have sub- cultural exports have been supported by favorable global prices stantial impacts on economic activity in FY2025/26 (year ended for rice and pulses. Conflict-related disruptions to transport and March 2026), while ongoing macroeconomic volatility, trade policy tourism continue to impact service receipts. Remittance incomes uncertainty, and elevated conflict continue to pose constraints. remained stable due to Myanmar’s large migrant workforce and fa- Garments, footwear and apparel-based manufacturing, which ac- vorable exchange rates on remittance transfers. count for about a third of total exports, is expected to be affected by reduced external demand from trade policy shifts. This is ex- Exchange rate volatility persists. The kyat lost 40 percent of its val- pected to reduce growth by around half a percentage point. The ue against the US dollar from January to August due to reduced resulting projection of 1.5 percent growth for FY2025/26 does not foreign exchange receipts, border trade disruption, and higher sea- yet account for the impacts of the earthquake and will be further sonal demand for foreign exchange. However, the exchange rate revised once more data on these impacts becomes available. De- has appreciated by about 21 percent since the end of August 2024, struction of household assets, rising food insecurity and high infla- supported by declining imports and news of financial support from tion are also likely to push more households into poverty. China for public infrastructure projects. This already bleak outlook faces significant downside risks. These The fiscal deficit is estimated to have risen by 0.1 points to 5.5 per- include risks of persistent negative impacts on production and in- cent of GDP in FY2024/25, due to increased recurrent spending. To- adequate support for affected communities and businesses in the tal expenditure is expected to have reached 27.4 percent of GDP in wake of the earthquake (including because of recent disruptions to FY2024/25, a 2.3 percentage point increase from FY2023/24, main- foreign aid flows). Other risks include a potential escalation of con- ly due to higher public sector wages, goods and services, and util- flict in the run up to planned elections (in late 2025 or early 2026) ity costs. Revenues are estimated to be 22.0 percent of GDP in and the risk of another natural disaster, which could further dis- FY2024/25, up from 20.0 percent, primarily due to a 2.0 percentage rupt transport, logistics, and border trade. Further restrictions on point rise in non-tax receipts (including oil and gas) to 15.5 percent trade and foreign exchange transactions would worsen shortages of GDP. Domestic sources dominate deficit financing, accounting of key inputs, raise consumer prices, and reduce business confi- for about 80 percent of total borrowing since FY2023/24. Limited dence. These could worsen food insecurity and impoverish more external borrowing has led authorities to rely mainly on the central households, while recent negative impacts on physical and human bank to finance the fiscal deficit. capital are likely to constrain long-term economic growth. Recent history and projections 2021 2022 2023e 2024e 2025e 2026e Real GDP growth, at constant market prices -8.6 -12.0 4.7 1.0 -1.0 1.5 Real GDP growth, at constant factor prices -9.0 -12.0 4.0 1.0 -1.0 1.5 Agriculture -5.7 -12.8 -2.2 2.0 -3.8 1.8 Industry -11.8 -8.2 8.0 0.0 -0.2 1.8 Services -8.4 -14.7 3.9 1.4 -0.3 1.1 Employment rate (% of working-age population, 15 years+) 52.8 53.5 53.8 53.8 53.8 53.8 Inflation (consumer price index) 2.3 9.6 27.2 27.5 26.0 30.0 Current account balance (% of GDP) -0.4 -2.4 -3.5 -2.2 -1.2 -2.5 Fiscal balance (% of GDP) -9.1 -1.4 -2.8 -5.4 -5.5 -6.0 Revenues (% of GDP) 14.8 11.1 21.3 20.0 22.0 23.3 Public sector debt (% of GDP) 54.2 54.4 58.8 62.2 62.4 62.5 Primary balance (% of GDP) -6.7 0.1 -0.6 -3.2 -3.2 -3.8 GHG emissions growth (mtCO2e) -4.6 -1.1 1.1 1.0 0.8 0.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Estimates and projections are for years ended March. The GDP growth forecast for FY25/26 will be revised once the earthquake's economic impact becomes clearer. Macro Poverty Outlook / April 2025 19 This outlook reflects information available as of April 10, 2025. FSM RMI PLW NORTH PACIFIC Population 1 112.6 38.8 17.7 ISLANDS thousand Poverty thousand living on less 44.4 2 2.7 3 .. than $3.65/day The economies in the North Pacific maintained their growth 0.46 0.23 0.22 1 momentum in FY24 driven by fisheries activity in FSM and GDP RMI, grant-related public investment, and delayed tourism current US$, billion recovery in Palau. Poverty rates are expected to continue 4084 5663 11022 1 their downward trend, contingent on sustained growth and GDP per capita continued U.S. Support. Significant reforms are needed to current US$ enhance long-term growth, reduce high reliance on foreign Sources: WDI, World Bank. 1/ 2023. 2/ 2013. 3/ 2019. aid and ensure fiscal sustainability. Key conditions and challenges Recent developments The North Pacific maintained its economic recovery in FSM, growth is estimated to have strengthened to 1.1 percent in In FSM FY24, driven by fisheries activity in the Federated States FY24, supported by pickup in consumption, activity in the fisheries of Micronesia (FSM) and the Republic of the Marshall sector, and the resumption of investment projects. After reaching Islands (RMI), public investment supported by Compact a decade-high, inflation moderated as energy and food prices be- of Free Association (COFA) grants, and delayed tourism gan to decline, coupled with easing supply-side constraints. FSM is recovery in Palau. While COFA funds are expected re- estimated to have recorded a smaller fiscal surplus of 1.3 percent main stable in the short to medium term, the high re- of GDP in FY24, due to both smaller revenues from fishing royalties liance on grants exposes North Pacific countries to po- and higher capital spending. Government debt declined to 10.6 tential shifts in external funding. Global trade policy un- percent in FY24 with overall debt risk rating upgraded to moderate certainty could impact investment and growth. Popula- from high risk. tion decline presents an existential risk in the region due to elevated levels of out-migration since the pan- RMI, output is estimated to have expanded by 3.4 percent in In RMI demic. To sustain economic momentum, diversification FY24, driven by sustained growth in fisheries activity and robust efforts are critical, including strengthening local indus- construction sector. Inflation remained elevated at over 4 percent, tries and attracting private investment. Poverty in the due to expansionary fiscal policies and an increase in minimum North Pacific rose between 2020–2022 but has declined wages. Despite these challenges, a modest fiscal surplus of 0.1 per- as the economies recover. cent of GDP is estimated in FY24 supported by strong grant inflows. FIGURE 1 / Real GDP, relative to 2019 GDP FIGURE 2 / Fiscal balance Percent of GDP Percent of GDP 140 4.0 3.5 130 3.0 120 2.5 2.0 110 1.5 1.0 100 0.5 90 0.0 -0.5 80 Federated States of Palau Republic of the 2019 2020 2021 2022 2023 2024 2025 2026 2027 Micronesia Marshall Islands North Pacific South Pacific Central Pacific 2023 2024 2025 Sources: National sources, IMF WEO, and World Bank projections. Sources: National sources, EconMap, IMF WEO, and World Bank projections. 20 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. While the debt level remains sustainable at 15.8 percent of GDP, dollars infrastructure project supported by the U.S., and activity the overall risk of debt distress remains high. in the fisheries sector. However, growth in the medium term could moderate to below one percent if structural challenges re- Palau, economic growth is estimated to have peaked at 9.3 per- In Palau main unaddressed, limiting the potential for poverty reduction. cent in FY24, driven by a surge in tourism (contributing roughly 40 Key constraints to sustained growth include high levels of out- percent of GDP pre-pandemic), that, after several years of delay, migration and moderate public investment. Inflation is expected has finally rebounded. This reflects the resumption of flights from to continue easing as commodity prices decline. After recording Asia and the recovery of Asian tourist flows. Inflation has further a surplus in FY24, the fiscal balance is projected to turn into a decreased to around 4 percent due to lower imported energy and small deficit in FY25 and thereafter, amid declining fishing rev- food prices. A substantial fiscal surplus of 3.5 percent of GDP is es- enues and normalizing grants. timated to have been achieved, thanks to higher tax collection from recent goods and services tax reforms and increased revenue from RMI, output is expected to grow by 3.3 percent in FY25, In RMI tourism activities. This follows several years of large fiscal deficits. mainly driven by the continued expansion of the fishery sector Public debt amounts to 78 percent of GDP, primarily concessional and strong construction activity financed by Compact transfers. terms and remains sustainable. Economic activity is expected to exceed pre-pandemic levels in FY25. In line with easing global food and energy prices, inflation in FY24 is expected to subside to 3.5 percent before declining Outlook to 2 percent from FY26 onwards. Modest fiscal surpluses are ex- pected in the medium term due to continued Compact funding. The outlook is subject to significant downside risks. Recent trade Due to population decline, real GDP growth translates to even policy uncertainty could impact the region through depressed glob- higher per capita income growth, which is projected to reduce al demand, weaker growth in trading partners, reduced remit- poverty to FY27. tances and, for Palau, lower tourism flows. However, decline in commodity prices could lower input costs. While Compact funds Palau, tourism recovery is expected to drive robust growth In Palau are not expected to be affected by changes in US development of 8.6 percent in FY25. However, slower-than-anticipated growth aid policy, an unanticipated reduction in non-Compact US federal in advanced economies could hinder this recovery and weaken programs and grants would reduce public investment, social pro- Palau's growth prospects. Inflation is forecast to decrease to 2.8 grams, and ultimately growth. The region’s vulnerability to natural percent and normalize at 2.5 percent in the medium term. A disasters and climate change remains an important underlying ad- fiscal surplus of 1.7 percent of GDP is projected for FY25, driven verse risk to economic growth and people’s welfare. by tourism receipts and tax reforms. A modest fiscal surplus, averaging 1.2 percent of GDP, is expected in the medium term, FSM FSM’s growth is projected to reach 1.3 percent in FY25, supported supported by Compact funding and continued implementation by the resurgence in public investment, including USD 2 billion of tax reforms. Recent history and projections 2022 2023e 2024f 2025f 2026f 2027f Real GDP growth, at constant market prices Federated States of Micronesia -0.9 0.8 1.1 1.3 1.4 0.7 Republic of the Marshall Islands -1.1 -3.9 3.4 3.3 2.7 2.3 Palau -1.3 1.9 9.3 8.6 3.5 2.4 Poverty rates of the Republic of the Marshall Islands 1,2 International poverty rate ($2.15 in 2017 PPP) 0.8 0.9 0.8 0.6 0.4 0.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 5.5 5.9 4.6 3.8 3.5 3.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 29.8 30.3 26.1 23.0 20.5 18.3 Source: Country authorities and World Bank, Poverty and Economic Policy Global Departments. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Values for each country correspond to their fiscal years ending September 30. 1/ Calculations based on EAPPOV harmonization, using 2019-HIES. 2/ Projection using neutral distribution (2019) with pass-through = 1 (High) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 21 This outlook reflects information available as of April 10, 2025. PAPUA NEW 1 2 Population Poverty million millions living on less than $3.65/day 10.6 5.0 GUINEA Life expectancy at birth years 3 School enrollment primary (% gross) 4 The reopening of a major gold mine boosted growth in 2024. 66.0 109.5 5 6 Fiscal consolidation continued to ensure macroeconomic GDP GDP per capita current US$, billion current US$ stability. To make growth more inclusive and reduce high poverty, prudent macroeconomic management, building 31.3 2958.7 human capital and creating a conducive business environ- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2009 (2017 PPPs). 3/ 2022. ment is critical. As a natural-resource exporter, the impact 4/ 2018. 5/ 2024. 6/ 2024. of commodity price declines may compound the potential effects of trade uncertainty. Large segments of the population continue to lag in socio-econom- Key conditions and challenges ic development. The most recent Household Income and Expen- diture Survey, from 2010, revealed that 40 percent of the popula- Since gaining independence in 1975, the economy has more than tion lived below the national poverty line of US$2.15 per day (in tripled. However, real GDP per capita has only seen an annual 2017 PPP terms). Despite the lack of an official poverty rate since increase of 0.9 percent—a sluggish rate compared to other lower 2010, household surveys suggest little change in monetary well-be- middle-income resource-exporting nations. The growth trajecto- ing. Using close monetary correlates, the estimated poverty rate in ry has been marked by pronounced fluctuations, reflecting high 2016/18 was 41 percent. In 2016/18, 74.2 percent of the population susceptibility to shifts in international commodity prices. The in- were multidimensionally poor, one of the highest rates globally, up clusiveness of growth has been limited by the heavy reliance on nearly 3 percentage points since 2010. Due to data limitations, re- capital in the resource sector and the underperformance of the cent estimates of multidimensional poverty are unavailable, but in non-resource sector. 2022, only 19 percent had access to safe drinking water and 15 per- cent to electricity, unchanged from 2016/18. Weak human development outcomes present missed opportuni- ties for faster and more inclusive economic growth. Papua New Guinea (PNG) has some of the poorest nutrition outcomes in the Recent developments world, with 48.2 percent of all children under the age of five being stunted. Furthermore, 26 percent of youth find themselves outside The economy continued to expand, with an above-average of training, education, and employment. Weak governance com- growth rate of 4.5 percent estimated for 2024, driven primarily by pounds the difficulties in effectively addressing these challenges, the reopening of Porgera gold mine in late December 2023. This with external shocks compounding fragility-related risks. is expected to create jobs and boost extractive sector growth, FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Key fiscal and debt indicators Percent, percentage points Percent of GDP 8 60 6 50 40 4 30 2 20 0 10 -2 0 -4 -10 2019 2020 2021 2022 2023 2024 2025 2026 2027 2020 2021 2022 2023 2024 2025 2026 2027 Extractive sector Non-extractive economy Revenue Expenditure Real GDP growth Overall balance Gross government debt Sources: Country authorities, IMF, and World Bank staff estimates and projections. Sources: Country authorities, IMF, and World Bank staff estimates and projections. 22 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. estimated at 5 percent, slightly higher than the 4.4 percent esti- By 2022, food insecurity and employment had both improved, and mated for the non-extractive sector. Improved access to foreign food shortage rates were similar to those in the 2016-2018 DHS. exchange is supporting growth in the non-extractive sector. However, surveys from 2022 and 2023-2024 indicate that many people still face significant challenges to their well-being. The pandemic exacerbated underlying fiscal weaknesses, and the government continued to implement its fiscal consolidation plan. The fiscal deficit is estimated to have narrowed to 3.9 percent of Outlook GDP in 2024 from 4.3 percent of GDP in 2023, supported by im- proved revenue mobilization. In 2024, total revenue increased by Growth momentum is expected to continue in 2025. Supported by 0.8 percentage points of GDP relative to 2023, mostly driven by increased production at the OK Tedi mine and the reopening of the non-resource tax revenue and a rebound in grants. This offset the Porgera gold mine, the economy is projected to grow by 4.3 per- lower-than-expected dividend payments from state-owned enter- cent. The non-resource sector, supported by improved access to prises and entities, foremost by Kumul Petroleum Holding. The foreign exchange, is also expected to drive growth. Medium-term non-resource primary balance also improved in 2024. growth is expected to settle at 3 percent as mining production nor- malizes. Inflation is projected to rise to 5.1 percent in 2025 due to Average headline inflation is estimated to have moderated to base effects and the passthrough of exchange rate depreciation. 0.6 percent in 2024, mostly driven by lower prices for locally However, it is expected to converge towards its historical average produced food items (e.g. betelnut). This more than offset the over the medium term. passthrough of the Kina depreciation to domestic prices. Core inflation is estimated at 3.9 percent at end-2024, below historic The economic outlook appears positive, but risks are tilted to average. The BPNG has implemented a crawl-like exchange rate the downside. Slower growth could result from lower export de- framework, and the Kina has gradually depreciated against the mand, the projected decline in commodity prices, reduced busi- USD. To ensure consistency with the new arrangement and keep ness confidence, political and social instability, and the impact of inflation expectations in check, BPNG tightened monetary policy. droughts and other climate-related events. The impact of com- Since April 2024, BPNG increased the policy rate by cumulative modity price declines may compound the potential effects of 200 basis points, to 4 percent and the cash reserve requirement trade uncertainty. However, it is difficult to gauge the full impact ratio by 200 basis points to 12 percent. These policies were sup- of recent measures as policy shifts may continue to unfold. PNG ported by an IMF program. continues to face risks stemming from conflict and violence. The brief episode of violence and looting in January 2024, although During the early COVID-19 pandemic, poverty likely increased, but short-lived, underscored the potential for such disruptions to ad- it returned to pre-pandemic levels by 2022. Surveys conducted at versely affect economic stability. The outlook does not account the beginning of the pandemic showed that severe food shortages, for potential new resource mega-projects, like Papua LNG. The which is closely linked to extreme poverty, were higher than those final investment decision and construction start present an up- recorded in the 2016-2018 Demographic and Health Survey (DHS). side risk to the outlook. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.7 3.8 4.5 4.3 3.2 3.1 Real GDP growth, at constant factor prices 5.8 3.1 6.1 4.4 3.2 3.1 Agriculture 3.1 1.0 7.1 3.5 3.4 3.4 Industry 6.6 1.6 2.7 3.0 0.6 0.0 Services 6.3 5.0 8.4 5.7 5.0 5.1 Inflation (consumer price index) 5.3 2.3 0.6 5.1 4.3 4.3 Current account balance (% of GDP) 32.8 23.3 23.0 20.4 20.2 19.2 Net foreign direct investment inflow (% of GDP) -1.1 -1.2 -1.2 -1.2 -1.2 -1.2 Fiscal balance (% of GDP) -5.3 -4.3 -3.7 -2.5 -1.3 0.0 Revenues (% of GDP) 16.6 17.9 18.7 19.3 19.7 20.1 Debt (% of GDP) 48.2 52.4 53.9 52.9 50.8 48.6 Primary balance (% of GDP) -2.9 -1.8 -0.5 0.5 1.3 2.5 GHG emissions growth (mtCO2e) 0.1 0.1 0.1 0.0 0.0 0.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 23 This outlook reflects information available as of April 10, 2025. 1 2 PHILIPPINES Population Poverty million millions living on less than $3.65/day 115.8 15.7 3 4 Life expectancy at birth School enrollment The Philippines remains among the region’s top performers years primary (% gross) as domestic conditions improved. In 2024, inflation fell within target, the fiscal deficit narrowed, and poverty de- 72.2 93.4 5 6 clined. Growth is projected to average 5.4 percent through GDP GDP per capita 2027, anchored on private domestic demand. Safeguarding current US$, billion current US$ growth amid heightened external uncertainty and raising growth potential require reforms that strengthen climate 461.7 3985.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. resilience, increase investments, and boost productivity. 4/ 2023. 5/ 2024. 6/ 2024. to keep inflation contained. This is expected to alleviate pressure Key conditions and challenges on households, potentially stimulating consumption growth. It also provides space for the central bank to lower interest rates further. The Philippines has seen broad-based acceleration in economic The government’s commitment to public investment is also expect- growth, driven by capital accumulation, a reallocation of jobs to- ed to support growth. wards higher-productivity sectors, and an expansion of the non- tradables sector. However, faster economic growth has relied on investment rather than productivity gains. Leading firms experi- Recent developments enced weaker job creation and slower output growth, limiting al- locative efficiency and frontier advancements crucial for long-term Growth inched up to 5.7 percent year-on-year in 2024, above growth. The relative decline of the tradables sector also raises con- potential growth of 5.5 percent, reflecting the ongoing economic cern as more globally connected firms outperform their domesti- recovery. On the production side, robust domestic activity and cally oriented counterparts. Finally, the catch-up process is at risk tourism fueled services. On the expenditure side, private con- from increasingly frequent climate events. Addressing these chal- sumption grew slower partly due to high prices of staple com- lenges requires strengthening connectivity, improving local gover- modities, including rice. Yet, consumption remained the main nance, and implementing climate adaptation strategies. Enhancing growth engine, supported by record high remittances and a competition and trade policies while streamlining regulations can healthy labor market. In addition, sustained growth in services also boost productivity and resource allocation. exports and faster disbursements in public spending partially off- set slower private investment growth. Supportive macroeconomic policies and stronger domestic de- mand conditions underpin growth prospects. However, trade poli- The current account deficit widened to 3.8 percent of GDP cy uncertainty could dampen trade and investment prospects.Low- in 2024, fueled by a 0.7 percent of GDP decline in semicon- er rice prices, and a more benign outlook for oil prices are expected ductor exports. In addition, services net exports moderated FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 15 70 180000 10 160000 60 5 140000 50 0 120000 40 100000 -5 30 80000 -10 60000 -15 20 40000 -20 10 20000 2019 2020 2021 2022 2023 2024 Household final cons. exp. Government cons. 0 0 Capital formation Exports 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Imports Statistical disc. International poverty rate Lower middle-income pov. rate GDP growth Upper middle-income pov. rate Real priv. cons. pc Source: Philippines Statistics Authority. Source: World Bank. Notes: See footnotes in table on the next page. 24 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. driven by higher spending of Filipino tourists abroad and hinder exports and manufacturing. Yet, growth is still forecast to slower growth in receipts in Information Technology Busi- be among the fastest in the region over the forecast horizon, re- ness Process Outsourcing exports. flecting the positive outlook on private domestic demand. Domes- tic activity will benefit from low and stable inflation, easing mone- Headline inflation remained within the BSP’s 2-4 percent target in tary policy, and a healthy labor market that will boost private con- the first quarter of 2025 (2.2 percent), led by the reduction in rice sumption and services. Meanwhile, investment growth will remain and fuel prices. Core inflation continued to decline, allowing the anchored on public infrastructure and the implementation of re- central bank to lower the policy rate. forms that liberalized investment in key sectors. The fiscal deficit narrowed to 5.7 percent of GDP in 2024. Revenues The fiscal deficit is projected to fall to 5.4 percent of GDP in 2025, increased by 1 percentage point of GDP, due to a surge in dividend led by a reduction in public spending. Infrastructure spending will remittances from government-owned and controlled corporations remain above 5 percent of GDP over the medium term. However, and robust growth in tax collections. The increase in revenues achieving the medium-term fiscal targets will require the passage cushioned the higher-than-programmed disbursements in infra- of additional tax reforms and a commitment to reduce spending. structure and personnel spending. The dynamic labor market and the easing of inflation are likely The labor market continued to improve, supporting higher house- to boost growth in household incomes. Poverty is expected to hold incomes. The unemployment rate remained low at 3.8 percent continue to decline, though extreme climatic events pose risks in February 2025 while underemployment declined to reach 10.1 with La Niña expected in the first quarter of 2025. Poverty inci- percent in February 2025. The reallocation of labor away into wage- dence is projected to fall to 11.6 percent in 2025 and 9.6 per- employment in relatively higher productivity sectors continued. Us- cent in 2027. ing the World Bank’s poverty line for lower-middle-income coun- tries of $3.65/day (2017 PPP), poverty incidence is projected to fall Heightened trade policy uncertainty and their combined impact on from 13.7 percent in 2023 to 12.6 percent in 2024. global growth represents the main downside risk. Financial mar- kets represent a related source of risk: prolonged uncertainty could trigger capital flight. Upside risks to growth include an improve- Outlook ment in domestic activity amid the lower inflationary pressures from declining global commodity prices. Coupled with a negative Growth is forecast to decelerate to 5.3 percent in 2025, weighed external demand shock, this could accelerate the path of monetary by the slowdown in global activity. Trade policy uncertainty may policy loosening, supporting private domestic demand. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 7.6 5.5 5.7 5.3 5.4 5.5 Private consumption 8.3 5.5 4.9 5.2 5.4 5.5 Government consumption 5.1 0.3 7.3 8.0 7.1 6.7 Gross fixed capital investment 9.8 8.2 6.3 6.4 6.6 6.9 Exports, goods and services 11.0 1.3 3.3 0.7 1.5 1.9 Imports, goods and services 14.0 1.0 4.2 3.4 4.0 4.4 Real GDP growth, at constant factor prices 7.6 5.5 5.7 5.3 5.4 5.5 Agriculture 0.5 1.2 -1.5 1.3 1.1 1.1 Industry 6.5 3.6 5.6 3.8 4.2 4.3 Services 9.2 7.1 6.7 6.6 6.5 6.5 Employment rate (% of working-age population, 15 years+) 56.6 57.2 57.5 58.9 58.9 58.9 Inflation (consumer price index) 5.8 6.0 3.2 3.1 3.0 3.0 Current account balance (% of GDP) -4.5 -2.8 -3.8 -4.2 -3.7 -3.4 Net foreign direct investment inflow (% of GDP) 2.3 2.0 1.9 1.8 1.7 1.7 Fiscal balance (% of GDP) -7.3 -6.2 -5.7 -5.4 -4.9 -4.4 Revenues (% of GDP) 16.1 15.7 16.7 16.2 16.2 16.3 National Government Debt (% of GDP) 60.9 60.1 60.7 60.2 59.7 59.6 Primary balance (% of GDP) -5.0 -3.6 -2.8 -2.4 -2.0 -1.5 1,2 International poverty rate ($2.15 in 2017 PPP) .. 1.6 1.4 1.2 0.9 0.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 13.7 12.6 11.6 10.6 9.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 51.3 50.6 50.0 49.3 48.6 GHG emissions growth (mtCO2e) 5.2 3.7 5.5 4.4 5.9 6.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2018-FIES and 2023-FIES. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2018-2023) with pass-through = 0.7 based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 25 This outlook reflects information available as of April 10, 2025. SOLOMON 1 2 Population Poverty million millions living on less than $3.65/day 0.8 0.4 ISLANDS Life expectancy at birth years 3 School enrollment 4 primary (% gross) The economy grew by 2.5 percent in 2024, driven by infra- 70.7 84.7 5 6 structure investments and increased mining activity. Medi- GDP GDP per capita current US$, billion current US$ um-term growth is projected to average 2.7 percent of GDP. The fiscal deficit is expected to average 3.2 percent of GDP, 1.7 2121.4 with the risk of debt distress upgraded to low. State fragility, Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2012 (2017 PPPs). 3/ 2022. climate change, and subdued global economic conditions 4/ 2023. 5/ 2024. 6/ 2024. (due to further trade policy shifts) pose downside risks. their finances and food insecurity remains high, with about half the Key conditions and challenges population eating less than they thought they should in the past 30 days. According to the 2012/13 Household Income and Expen- Solomon Islands is a small, remote archipelago with 721,000 inhab- diture Survey (HIES), 61 percent of the population was considered itants spread across 90 inhabited islands. Geographic dispersion, poor based on the lower-middle-income poverty line ($3.65 per day remoteness from global markets, and vulnerability to natural dis- in 2017 PPP). asters all pose significant barriers to growth. Limited state capacity, along with complex political and economic dynamics, often ham- pers the formulation and implementation of effective public policy. Recent developments Poor infrastructure, chronic underemployment, and a small private sector provide substantial growth hurdles. After the growth driven by the Pacific Games in 2023, the economy grew by 2.5 percent in 2024, driven by national election related Solomon Islands are vulnerable to natural disasters such as earth- spending and public investments in the energy and transportation quakes, cyclones, and tsunamis, which can inflict major economic sectors, alongside a surge in mining activity. Increased internation- damage. Historically, the forestry sector has served as a primary al visitor arrivals had a positive impact on accommodation, restau- engine of growth. However, unsustainable exploitation has led to a rant, and transportation sectors. rapid decline in logging activity, underscoring the urgent need for alternative sources of growth. Inflation eased to 3.7 percent in 2024 due to a stabilization of im- port prices. In response, the central bank adopted an accommoda- World Bank phone survey data collected in the first nine months of tive policy stance. Meanwhile, the financial sector remains relative- 2024 indicates that about half of all households are worried about ly stable, with well capitalized banks and adequate liquidity levels. FIGURE 1 / Real GDP FIGURE 2 / Fiscal balance Percent of GDP Index (2019=100) Percent of GDP 4 160 0 3 -0.5 140 2 -1 120 1 -1.5 0 100 -2 -1 -2.5 80 -2 -3 60 -3 -3.5 -4 40 -4 2020 2021 2022 2023 2024 2025 2026 2027 2022 2023 2024 2025 2026 Real GDP, % change Real GDP, Index (2019=100) (rhs) Fiscal balance Primary balance Source: World Bank staff estimates. Source: World Bank staff estimates. 26 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The current account deficit narrowed to 4.3 percent of GDP in may negatively affect growth. Inflation is projected to average 3.6 2024, driven by reduced import demand and rising mineral ex- percent in 2025–27. Poverty is expected to decline with projected ports offsetting the long-term decline in logging exports. The bal- economic growth and increasing remittances. The new 2024/25 ance of payments recorded a slight deficit in 2024, with foreign HIES, which will become available in 2026, will help update the reserves decreasing from 10.1 months of imports in 2023 to 9.1 poverty measure. months in 2024. The current account deficit is projected to average 7.7 percent of The fiscal deficit reached 3.1 percent of GDP in 2024. Total rev- GDP in 2025-27, primarily due to increased import needs from in- enues expanded slightly to 32.7 percent of GDP, with increased frastructure projects and a decline in logging exports. Reserves are mining revenue offsetting declining logging revenue, while total expected to decline to 7 months of imports while remaining within expenditures increased to 35.8 percent in 2024. The government the adequacy range of 3 to 8 months of imports. managed to contain expenditure growth, despite facing substantial spending demands, including the organization of the national gen- The fiscal deficit is projected to remain stable over the medium eral election and large infrastructure investments. Public debt in- term, reaching 3.1 percent of GDP in 2027. This partly reflects the creased from 20.3 in 2023 to 22.3 percent of GDP in 2024, due to a normalization of development grants after the pandemic, the Pa- rising primary fiscal deficit. cific Games, and election preparations. Public debt is sustainable, and the risk of external debt distress was upgraded from moderate to low in February 2025, due to increased export performance. Outlook Increased participation in regional labor mobility programs is likely The economy is expected to grow by 2.7 percent on average to provide further economic benefits, while substantial infrastruc- over the period 2025–27. The continued decrease in logging is ture investments may start generating second-order economic re- anticipated to be offset by a sizable infrastructure pipeline and turns in the medium term. Adverse global economic conditions, in- increased mining activity. Through the remittance channel, the cluding further trade policy shifts, may reduce demand for com- labour mobility program is anticipated to boost economic activ- modity exports, particularly logs. This could negatively impact ity. Since exports to US are negligible, the direct impact of the growth, the current account balance, and government finances. recent trade policy shift is limited. However, as a growing miner- Other downside risks include low levels of cash reserves, societal al commodity exporter, the impact of global commodity declines instability, and climatic shocks. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.4 2.7 2.5 2.6 2.7 2.9 Real GDP growth, at constant factor prices 2.3 4.3 2.5 2.7 2.7 3.0 Agriculture 3.3 1.8 1.0 0.8 0.7 1.4 Industry 1.0 12.8 7.2 7.3 5.9 6.4 Services 2.3 3.3 2.0 2.1 2.6 2.6 Inflation (consumer price index) 5.4 5.1 3.7 3.8 3.7 3.4 Current account balance (% of GDP) -13.9 -10.6 -4.3 -7.9 -7.7 -7.6 Net foreign direct investment inflow (% of GDP) 2.7 4.4 0.9 2.3 2.6 2.7 Fiscal balance (% of GDP) -2.4 -3.8 -3.1 -3.2 -3.3 -3.1 Revenues (% of GDP) 38.3 36.3 32.7 32.6 32.8 32.9 Debt (% of GDP) 15.5 20.3 22.3 24.4 26.4 28.0 Primary balance (% of GDP) -2.1 -3.5 -2.6 -2.7 -2.7 -2.4 GHG emissions growth (mtCO2e) 0.0 0.0 0.0 0.0 0.0 0.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 27 This outlook reflects information available as of April 10, 2025. WSM TON VUT SOUTH PACIFIC Population 1 216.7 104.6 320.4 ISLANDS thousand Poverty 21.0 1.7 106.3 2 3 4 thousand living on less than $3.65/day Samoa and Tonga’s economy grew in FY24, driven by 0.93 0.52 1.10 1 tourism, reconstruction, and remittances. Although both are GDP projected to recover to pre-pandemic levels in 2025, uncer- current US$, billion tainties in the global environment pose risks. Vanuatu faced 4114 4886 3323 1 multiple shocks in 2024, leading to subdued growth and ris- GDP per capita ing poverty. Structural reforms and adaptive fiscal policies current US$ are needed to boost investment, growth, and resilience. Sources: WDI, World Bank. 1/ 2023. 2/ 2013. 3/ 2021. 4/ 2019. supported by tourism, remittances, and easing global commodity Key conditions and challenges prices. However, risks remain from slowing growth in tourism markets, commodity price volatility, supply chain disruptions, and The tourism and remittance-dependent countries in the South Pa- rising minimum wages. cific are highly vulnerable to external shocks like COVID-19 and nat- ural disasters, which have hindered economic growth and fiscal Tonga, the economy grew by 1.8 percent in FY24, driven In Tonga stability. Post-disaster supply bottlenecks and rising demand, espe- by reconstruction efforts, resilient consumption, and a gradual cially for reconstruction, drive up prices and threaten livelihoods. tourism rebound. Inflation fell to 4.6 percent as global com- Fiscal policy should strengthen social protection while building re- modity prices declined, despite a temporary rise in June 2024 silience to shocks. Boosting growth requires structural reforms due to El Niño's impact on food prices. The current account to enhance investment and private sector development. In the deficit increased to 7.4 percent of GDP due to high imports near term, reconstruction in Vanuatu from multiple natural haz- for reconstruction and reliance on imported fuel and commodi- ards should be prioritized. ties, despite modest export improvements. The fiscal balance remained in surplus at 3.5 percent in FY24, even with higher reconstruction expenses after slower execution in FY23. Pover- Recent developments ty rates in 2021 were 1.6 percent based on the lower-middle- income line and 21.5 percent using the upper-middle-income In Samoa Samoa, growth reached 9.4 percent in FY24, driven by tourism line. The declining number of Tongan seasonal workers in Aus- recovery and strong remittances. Inflation fell from 12.0 percent tralia (52.6 percent drop between June 2023 and November in FY23 to 3.6 percent in FY24 due to lower food and energy 2024) might have reduced the remittances and slowed the pace prices and base effects. The current account recorded a surplus, of poverty reduction. FIGURE 1 / Overall fiscal balance FIGURE 2 / Inflation (annual average) Percent of GDP Percent 12 14 10 12 8 10 6 8 4 6 2 4 0 -2 2 -4 0 -6 -2 -8 -4 FY2018 FY2020 FY2022 FY2024f FY2026f FY2017 FY2019 FY2021 FY2023e FY2025f FY2027f Samoa Tonga Vanuatu Samoa Tonga Vanuatu Sources: National sources and World Bank projections. Sources: National sources and World Bank projections. 28 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Vanuatu, the economy grew by an estimated 0.9 percent in FY24 In Vanuatu account balance is expected to return to a deficit in FY25 due to a due to two shocks: the liquidation of Air Vanuatu in May and a sizeable increase in imports, which partially offsets higher tourism 7.3 MW earthquake in December. The airline’s collapse disrupt- earnings but remain below 2 percent of GDP over the medium- ed tourism, while the earthquake caused capital stock damages of term. The fiscal deficit is expected to widen but remain below 2 17.5 percent of GDP, mainly in Port Vila. Inflation fell to 4.2 per- percent in the medium term as revenues decline with lower grants cent due to lower food and energy prices and monetary tightening. and tax normalization, while capital spending rises. Poverty worsened, particularly in Shefa Province, where food se- curity, employment, and income declined for households affected Tonga, growth is expected to accelerate to 2.2 percent in FY25 In Tonga by the earthquake. For example, 55 percent of Shefa households due to strong domestic demand, public investments, and a re- faced difficulties in accessing markets due to the earthquake, and bound in agriculture as El Niño effects fade. Headline inflation is the proportion of the population in moderate food insecurity in- projected to ease to 3.2 percent and stay below 5 percent in FY25 creased from 29 percent in December 2024 to 48 percent in Janu- and beyond. The current account deficit is forecast to widen to 7.8 ary/February 2025. A current account deficit of 7.4 percent of GDP percent of GDP in FY25 as grants and remittances normalize. The resulted from tourism receipts plunging from 14.2 percent in 2023 fiscal balance is expected to shift to a deficit of 1 percent of GDP to 3.5 percent. The fiscal deficit rose to 6.4 percent of GDP due to in FY25 as grant revenues decrease towards its pre-pandemic lev- revenue declines and Air Vanuatu-related expenditures. els. With projected economic growth, the poverty rate measured by the upper-middle-income poverty line is likely to decline to around 16.9 percent in 2025. Outlook Vanuatu, the economy is expected to contract by 1.8 percent In Vanuatu The outlook for the South Pacific considers trade policy uncer- in 2025 before recovering in the medium term. The loss of cap- tainty that could affect global growth. While the direct impacts ital stock and disruption in supply chains due to the earthquake may be limited, the decline of commodity prices might com- will likely result in a reduction in output in the first quarter of pound the effects of trade uncertainty. It remains challenging to 2025 alongside an increase in inflation. However, the need to assess the full impact of recent measures as policy changes may rebuild infrastructure and replace capital stock will result in in- continue to develop. creases in government and private spending, stimulating domes- tic economic activity amid a challenging global environment. The In Samoa Samoa, growth is projected at 5.3 percent in FY25, then 2.4 per- near-term growth outlook is subject to considerable uncertainty, cent in the medium term (FY26–27), driven by continuing remit- with early signs of infrastructure recovery pointing to potential tance inflows, public investment and increased expenditure relat- upside risks. The fiscal deficit is forecasted at 7.5 percent of GDP ed to the Commonwealth Heads of Government Meeting (CHOGM). due to reduced non-tax revenues and reconstruction spending. Inflation is expected to decline to 3.0 percent in FY25 and is pro- Poverty is expected to rise to 48.9 percent by 2027 as income jected to remain at 3 percent over the medium term. The current growth remains weak. Recent history and projections 2022 2023e 2024f 2025f 2026f 2027f Real GDP growth, at constant market prices Samoa -5.3 9.2 9.4 5.3 2.6 2.1 Tonga 0.0 2.0 1.8 2.2 1.8 1.6 Vanuatu 5.2 2.2 0.9 -1.8 2.3 2.6 1,2 Poverty rate Tonga (Upper-middle-income poverty rate, $6.85 in 2017 PPP) 21.5 19.9 18.0 16.9 16.2 15.4 Vanuatu (Lower-middle-income poverty rate, $3.65 in 2017 PPP) 41.5 42.1 43.9 47.5 48.2 48.9 Source: Country authorities and World Bank, Poverty and Economic Policy Global Departments. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Financial years for Samoa and Tonga are July-June, for Vanuatu it is January-December. Samoa improved the methodology for GDP calculation and revised the historical data in March 2022 GDP release. 1/ Calculations based on EAPPOV harmonization, using 2021 HIES for Tonga and 2019 NSDP Baseline Survey for Vanuatu. 2/ Projection using neutral distribution with pass-through = 1 (High) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 29 This outlook reflects information available as of April 10, 2025. 1 2 THAILAND Population Poverty million millions living on less than $6.85/day 71.9 6.1 3 4 Life expectancy at birth School enrollment After accelerating to 2.5 percent in 2024, real GDP growth years primary (% gross) is projected to slow to 1.6 percent in 2025, as global trade policy shifts and heightened uncertainty weigh on exports 79.7 103.5 5 6 and investment. Amid slower growth, the pace of poverty GDP GDP per capita reduction is expected to decelerate with the poverty rate current US$, billion current US$ declining to 7.1 percent in 2024. Amid high uncertainty, risks to the outlook are high. 526.0 7316.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. public debt remains fiscally sustainable but faces the challenge of Key conditions and challenges rising spending pressure to meet aging-related public services and investment to boost growth. Public debt is projected to approach The economy grew by 2.5 percent in 2024, surpassing expectations the ceiling of 70 percent of GDP in the next five years. due to an unexpected improvement in goods exports and the roll- out of fiscal stimulus (THB 10,000 cash transfer) which offset slow- ing private consumption and tourism arrivals. Tighter credit condi- Recent developments tions and high household debt weighed on car purchases and man- ufacturing. As a result, manufacturing weakened. The latest GDP release showed that growth picked up at 3.2 per- cent year-on-year in 2024 Q4. Public investment returned to the Due to sluggish growth in household incomes, poverty alleviation fore as a growth driver following several quarters of delayed bud- has slowed. Policy measures to boost consumption among low- get execution amid the political transition. Goods exports bene- income households is estimated to reduce poverty in the short fited from the electronics upcycle. Private consumption accelerat- term, but structural challenges pose risks to medium and long- ed marginally as the fiscal stimulus (THB 10,000 cash transfers) term poverty reduction. helped offset the effects of tightened credit and high household debt. However, manufacturing remained flat and private invest- Despite the recent uptick in GDP growth, Thailand’s recovery con- ment contracted. Tourism recovery also showed signs of slowing; tinued to lag behind peers with GDP remaining below its potential arrivals reached only 88 percent of pre-pandemic levels in 2024. level. Potential growth is expected to decrease by around 0.5 per- centage points to 2.7 percent in 2022-30. At this rate, Thailand will In January, headline inflation edged up to 1.3 percent, marking not achieve its high-income aspirations by 2037. Raising competi- the fifth consecutive month of increase, due to the effect of stim- tiveness can help attract investments and move economic activity ulus and reduction in fuel subsidy. Given anchored inflation ex- into more innovative or productive global value chains. Thailand’s pectations, the Bank of Thailand (BOT) lowered the policy rate FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 8 35 180000 6 160000 30 4 140000 25 2 120000 0 20 100000 -2 15 80000 -4 60000 10 -6 40000 5 20000 -8 2018 2019 2020 2021 2022 2023 2024f 2025f 2026f 2027f 0 0 Private consumption Government consumption 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Gross Fixed Investment Net exports International poverty rate Lower middle-income pov. rate Change in inventories* GDP Upper middle-income pov. rate Real GDP pc Sources: World Bank staff calculations and NESDC. Source: World Bank. Notes: See footnotes in table on the next page. Note: *Includes statistical discrepancy. 30 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. to 2.0 percent in February to alleviate household debt-servicing central bank’s target range in 2025. The general government deficit pressure amid recent tightening credit standards. The current ac- is projected to increase to 3.1 percent in FY25. This is mainly due count surplus rose to 6.7 percent of GDP as tourism receipts to fiscal stimulus spending and acceleration in public investment mounted and the trade balance continued to benefit from ro- in FY25, leading to higher public debt. The current account bal- bust global demand. ance is expected to increase to 3.4 percent of GDP in 2025, driven by services trade. The goods trade balance is projected to decline. Labor market trends were generally stable until 2024 Q3, with only Poverty is estimated to have declined to 7.1 percent in 2024, dri- a 0.1 percent reduction in total employment in 2024. However, ven by stronger economic growth. The one-time cash transfer to employment in blue chip manufacturing sectors contracted by 1.4 14.6 million state welfare cardholders, introduced under the first percent while tertiary services sectors, such as transport, storage, round of the Digital Wallet program, likely boosted consumption accommodation and food services registered strong growth. The and contributed to an estimated 3 percentage point reduction in patterns underscore Thailand’s challenges in supporting workforce headcount rates. To enhance fiscal resilience, Thailand should re- transitions from traditional to more modern sectors. Additionally, duce energy subsidies, implement tax reforms to raise revenue while household debt growth decelerated in 2024 Q2, personal and promote equity, provide targeted transfers to support vulner- consumer loans continued to rise in 2024 Q4 and accounted for able households, and accelerate public investments in infrastruc- a third of household debt. The absence of continued deleveraging ture, technology, and human capital. could threaten future prospects for poverty reduction. Risks to the outlook are tilted to the downside, driven by the recent earthquake and heightened trade policy uncertainty. The earth- Outlook quake may dampen growth through a potential slowdown in tourism, as uncertainty around the full extent of the damage per- Recent trade policy shifts and increased global uncertainty are pro- sists. Uncertainty surrounding unfolding trade policy is also expect- jected to slow Thailand’s growth to 1.6 percent in 2025, due to ed to weigh on investment and growth. While it is difficult to gauge weaker exports and private investment. Tourism may also soften the full impact of recent measures, impacts are potentially signif- amid a global slowdown. Private consumption will ease with declin- icant given Thailand’s openness and integration into global value ing earnings and deleveraging, though fiscal stimulus—especially chains. With value added from exports accounting for 10 percent the Digital Wallet and targeted business support—will cushion the of GDP, Thailand’s economy is vulnerable to shifts in trade policy impact. Private investment will slow amid uncertainty. Growth is and global economic activity. A slowdown in the US, China, or EU expected to remain subdued at 1.8 percent in 2026. Annual infla- could weaken demand for Thai exports and tourism, which will al- tion is projected to increase to 0.8 percent but remain below the so affect business investments. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.6 2.0 2.5 1.6 1.8 2.0 Private consumption 6.2 6.9 4.4 2.6 2.1 2.0 Government consumption 0.1 -4.7 2.5 1.9 1.6 1.5 Gross fixed capital investment 2.2 1.2 0.0 -0.8 0.4 1.6 Exports, goods and services 6.2 2.4 7.8 -1.3 2.0 3.0 Imports, goods and services 3.4 -2.5 6.3 -1.4 1.9 3.0 Real GDP growth, at constant factor prices 3.4 0.9 2.5 1.6 1.8 2.0 Agriculture 1.2 2.0 -1.0 2.3 2.0 2.1 Industry 4.1 -5.7 0.7 -1.2 1.0 2.0 Services 3.3 4.6 3.9 3.0 2.1 1.9 Inflation (consumer price index) 6.1 1.2 0.4 0.8 1.2 1.1 Current account balance (% of GDP) -3.5 1.4 2.4 3.7 4.1 4.1 Net foreign direct investment inflow (% of GDP) 0.8 -1.4 -1.0 -1.2 -1.1 -1.1 Fiscal balance (% of GDP) -4.4 -2.0 -1.3 -3.1 -2.8 -2.7 Revenues (% of GDP) 19.8 20.7 21.3 21.2 21.4 21.4 Debt (% of GDP) 59.7 62.0 63.3 66.0 68.0 70.1 Primary balance (% of GDP) -3.4 -1.1 -0.5 -2.3 -2.0 -1.8 1,2 International poverty rate ($2.15 in 2017 PPP) 0.0 0.0 0.0 0.0 0.0 0.0 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.4 0.2 0.1 0.1 0.0 0.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 11.0 8.5 7.1 6.3 5.6 4.8 GHG emissions growth (mtCO2e) 1.6 1.9 1.2 2.1 2.5 1.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2016-SES and 2023-SES. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2016-2023) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 31 This outlook reflects information available as of April 10, 2025. 1 2 TIMOR-LESTE Population Poverty million millions living on less than $3.65/day 1.4 0.8 3 4 Life expectancy at birth School enrollment Timor-Leste’s economy rebounded in 2024, supported by years primary (% gross) public spending and a strong recovery in tourism. Inflation eased, but food prices remained high, straining vulnerable 69.1 123.3 5 6 households. Medium-term growth will depend on infrastruc- GDP GDP per capita ture, Greater Sunrise negotiations, and membership of the current US$, billion current US$ Association of Southeast Asian Nations. A widening external deficit and heavy reliance on the Petroleum Fund pose risks 1.8 1289.0 Sources: WDI, PiP, and official data. 1/ 2024. 2/ 2014 (2017 PPPs). 3/ 2022. 4/ 2023. to long-term fiscal and economic stability. 5/ 2024. 6/ 2024. base—dominated by coffee—offers little buffer against oil mar- Key conditions and challenges ket fluctuations. Reduced oil production has further widened the trade gap. Heavy reliance on imports, driven by weak Over the past decade, growth has stagnated at an average domestic production, exacerbate the current account deficit. of just 1 percent annually, reflecting deep-rooted structural Though remittances and positive net primary income offer par- weaknesses. The economy remains heavily dependent on tial relief, they remain insufficient to offset the widening exter- public expenditure, with government spending exceeding 80 nal imbalance. The country has been relying heavily on with- percent of GDP since 2007—one of the highest levels glob- drawals from the Petroleum Fund to finance its current ac- ally. The non-oil economy remains small and undiversified, count deficit, raising concerns about long-term sustainability. resulting in a stagnant labor market and persistent external The Petroleum Fund, the primary source of state funding and imbalances. This has compounded challenges in job creation foreign exchange reserves, faces potential depletion within the and income diversification, leaving large portions of the pop- next decade. This is due to excessive withdrawals and the de- ulation vulnerable to economic shocks. The impact on pover- cline in oil production. This presents a critical fiscal sustainabil- ty remains uncertain, as the first living standards survey in ity risk, potentially leading to severe spending cuts over the ten years has only just been completed and the updated coming decade that could undermine public service delivery poverty statistics are still being processed. Nevertheless, a and social stability. To safeguard long-term economic stabili- recent labor force survey indicates very low workforce par- ty, Timor-Leste must implement comprehensive fiscal reforms. ticipation (around 30 percent) and declining labor productiv- These should focus on broadening the domestic tax base, ra- ity between 2013 and 2021 (-2.1 percent per year). tionalizing public expenditure, and enhancing spending efficien- cy. Equally crucial is to build an environment that encourages Timor-Leste faces deep external vulnerabilities due to a private sector investment, supports job creation, and fosters persistent trade deficit. The country’s narrow non-oil export economic diversification. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 60 80 1600 40 70 1400 60 1200 20 50 1000 0 40 800 -20 30 600 -40 20 400 -60 10 200 2000 2003 2006 2009 2012 2015 2018 2021 2024 0 0 Gov. cons. Exports GFCF 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Real GDP pc Sources: Timor-Leste’s Statistics Office (INETL) and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 32 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Recent developments Outlook In 2024, the economy grew by an estimated 4.1 percent, driven by Timor-Leste is expected to maintain steady growth through strong public spending and a rebound in the services sector, partic- 2025–2027, with average growth projected at 3.5 percent. Infra- ularly tourism. Foreign tourist arrivals surged by 25 percent year- structure development, particularly road construction, will be a on-year, boosting hospitality and retail sectors. Growth was further primary growth driver. The anticipated 2025 agreement on the supported by gains in telecommunications and transportation. Greater Sunrise gas field with Australia could strengthen long-term prospects, while tourism, remittances, and an expanding digital Improved budget execution contributed to this performance. Capi- economy—supported by fiber-optic infrastructure—are expected tal spending increased by nearly 50 percent (19.3 percent of GDP), to contribute to growth. surpassing pre-pandemic levels due to preparations for national events. Transfer payments also rose by 5 percent (32 percent of However, structural constraints persist. The narrow export base GDP), further stimulating domestic demand and household con- and heavy reliance on imports will continue to limit non-oil sector sumption. However, total government spending remained excep- expansion and deepen external vulnerabilities. While it is diffi- tionally high at 91 percent of GDP. cult to gauge the full impact of recent measures, uncertainty in trade policy could impact investment and growth. The current ac- Inflation eased to an average of 2.1 percent in 2024, though food count deficit is expected to widen as high import levels persist. prices remained elevated due to weak agricultural production and Although ASEAN integration offers opportunities for trade diver- adverse weather. A stronger U.S. dollar (legal tender) helped lower sification and foreign investment, high import dependence and non-food prices. While overall inflation moderated, its cumulative exposure to global market fluctuations may limit its ability to fully impact over the past two years has disproportionately affected leverage these opportunities. poor and vulnerable households. The full extent of these effects awaits the 2024 Living Standards Survey. Inflation is expected to ease but vulnerabilities remain. Heavy reliance on imports leaves the economy exposed to global The current account deficit surged to 29 percent of GDP in 2024, price shocks, especially in food and energy. The use of the from 10 percent in 2023, driven by falling oil exports and rising U.S. dollar as the national currency further restricts the gov- imports. Oil revenues fell by 73 percent as the Bayu-Undan field ernment’s ability to implement monetary policy responses to neared depletion, while non-oil exports dropped by 30 percent external shocks. from an already low base. As a dollarized economy, Timor-Leste lacks monetary policy tools to mitigate external shocks. While a The fiscal deficit remains a critical concern, projected to average 58 stronger U.S. dollar boosts purchasing power, it also increases re- percent of GDP over 2025–2027, financed by continued excessive liance on imports and deepens external vulnerabilities. Although withdrawals from the Petroleum Fund. Without substantial fiscal tourism, remittances, and net primary income provided some re- reforms, the fund faces potential depletion within the next decade, lief, they were insufficient to offset the widening gap. posing serious risks to long-term stability. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.0 2.4 4.1 3.5 3.4 3.5 Private consumption 14.0 3.4 3.3 5.8 5.8 5.9 Government consumption -0.3 -0.8 2.6 2.0 2.4 2.6 Gross fixed capital investment 27.0 11.5 33.6 6.8 3.2 3.3 Exports, goods and services 30.3 31.9 34.0 1.8 1.8 1.8 Imports, goods and services 22.9 4.9 12.5 4.9 5.0 5.3 Real GDP growth, at constant factor prices 3.6 2.5 4.1 3.5 3.5 3.4 Agriculture 5.4 2.3 2.3 2.9 2.9 2.9 Industry 36.5 -22.4 10.0 2.4 2.4 2.4 Services 2.4 3.3 4.4 3.6 3.6 3.6 Inflation (consumer price index) 7.0 8.4 2.1 3.0 2.5 2.5 Current account balance (% of GDP) 16.3 -20.6 -49.3 -53.8 -58.4 -63.6 Net foreign direct investment inflow (% of GDP) 1.7 1.7 1.8 1.8 1.7 1.6 1 Fiscal balance (% of GDP) -59.5 -40.9 -50.5 -55.3 -54.1 -53.9 Revenues (% of GDP) 43.6 41.2 40.8 41.2 41.3 41.5 Debt (% of GDP) 15.1 14.4 14.3 15.1 14.7 13.4 Primary balance (% of GDP) -59.3 -40.6 -50.2 -55.0 -53.9 -53.8 2,3 International poverty rate ($2.15 in 2017 PPP) 28.8 28.3 27.0 26.1 25.2 24.4 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 73.0 72.6 71.6 70.8 70.1 69.5 GHG emissions growth (mtCO2e) -0.4 -1.2 -1.6 -1.6 -1.4 -1.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The ESI is part of total revenue, while excess withdrawals from the PF is a financing item. 2/ Calculations based on EAPPOV harmonization, using 2014-TLSLS. Actual data: 2014. Nowcast: 2015-2024. Forecasts are from 2025 to 2027. 3/ Projection using annualized elasticity (2007-2014) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 33 This outlook reflects information available as of April 10, 2025. 1 2 VIET NAM Population Poverty million millions living on less than $3.65/day 101.0 4.2 3 4 Life expectancy at birth School enrollment After real GDP growth of 7.1 percent in 2024, GDP growth years primary (% gross) is projected to slow to 5.8 percent in 2025 given increased uncertainties due to recent trade policy shifts and a pro- 74.6 122.5 5 6 jected slowdown of global growth. The share of the popu- GDP GDP per capita lation living on less than $3.65 per day is expected to current US$, billion current US$ decline to 3.6 percent. 462.1 4576.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. demand in 2024 led to the recovery of manufacturing and ser- Key conditions and challenges vices exports from a contraction in 2023. The real estate sector showed signs of improvement, contributing to recovery of private As a trade-oriented economy (imports and exports represent al- domestic investment, as the supply of newly licensed property most 170 percent of GDP), Viet Nam is particularly exposed to projects and apartment units picked up in 2024 while more at- ongoing shifts in global trade policies and associated uncertainty tractive mortgage rates for new loans increased demand. which would impact exports, investment, and growth. The US re- mains the largest export destination of Viet Nam, accounting for Amid higher growth, labor market conditions improved. Manu- 30 percent of total exports, compared to 15 percent to China, 13 facturing employment growth strengthened to 3.4 percent (y/ percent to the EU and 8 percent to ASEAN countries, while China y) by November 2024 from -2.3 percent a year earlier. Real in- accounts for 38 percent of its imports. Uncertainty may also further come grew by 4.8 percent compared to 1.3 percent in 2023, weaken consumer confidence and spending which has lagged GDP due to improved labor market conditions and public sector growth in recent years. Meanwhile, financial sector vulnerabilities wage hikes. However, income growth has not fully translated persist with the average loan-loss coverage ratio among 26 banks at into private consumption, and gross savings rate remains high 83 percent compared to 150 percent in 2022. While the government at 37.2 percent in 2024. Headline inflation inched up to 3.6 has fiscal space to support demand, effective implementation may be percent in 2024 compared to 3.3 percent in 2023, well below hampered by chronic under-disbursement in public investment. the State Bank of Viet Nam (SBV) target of 4-4.5 percent, dri- ven by food, transport, and administered prices for health and education. Core inflation remained subdued at 2.7 percent for Recent developments the year. Strong GDP growth, easing inflation, and improved labor market conditions in 2024 are expected to have con- GDP growth accelerated from 5.1 percent in 2023 to 7.1 percent tributed to poverty reduction. The poverty rate declined from in 2024, buoyed by a strong rebound in exports. Higher external 4.0 to 3.8 percent (lower middle-income country line), driven FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 10 90 80 8 80 70 6 70 60 60 4 50 50 2 40 40 0 30 30 -2 20 20 -4 10 10 2017 2018 2019 2020 2021 2022 2023 2024 2025f 2026f 2027f 0 0 Gov. cons. GFCF Inventories 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Private cons. Net exports Statistical disc. International poverty rate Lower middle-income pov. rate GDP Upper middle-income pov. rate Real GDP pc Sources: Viet Nam’s General Statistics Office and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 34 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. by real income growth. However, lower growth in the agriculture transactions have remained limited, they are expected to recover sector suggests more limited gains among the poorest. in 2025-26. Headline inflation is set to remain within target of 4.5-5 percent as oil and commodity prices are projected to continue eas- Viet Nam’s external position deteriorated with the current account ing. The projected economic growth augurs well for poverty reduc- surplus being offset by financial outflows and large unrecorded tion efforts in the country. Nevertheless, external economic uncer- capital outflows amid continued interest rate differentials. Further, tainties pose risks that could lead to job losses among unskilled global strengthening of the US dollar added pressure on the local workers and might put in jeopardy some of the recent gains in currency. In response, the SBV intervened by drawing down cur- poverty reduction. rent reserves to about 2.5 months of imports by Q3-2024 while withdrawing liquidity through OMOs and issuance of T-bills. This outlook is subject to increasing downside risks, particularly on the external side. These include challenges from adverse trade Credit growth improved during 2024, reaching the government’s policy shifts, slower-than-expected global growth, and global policy target of 15 percent by the end of the year, driven by credit to the uncertainty. Given the country’s exposure to the external environ- wholesale and retail trade, manufacturing, and real estate sectors. ment, stronger-than-expected distortions in trade policy could ad- However, non-performing loans have remained at 4.6 percent by versely impact exports and growth. A slower-than-expected glob- September 2024, while the average loan-loss coverage ratio among al growth could also reduce external demand and affect exports 26 banks declined to 83 percent in Q3–2024, well below the peak and private investments including FDI. Further, higher-than-expect- of 151 percent in 2022. ed policy uncertainty could weigh down on investment and growth. Reduced recurrent expenditures, under-disbursement of public Policy measures should focus on expanding public investment, investment and higher than planned revenue collection led to mitigating fiscal sector risks, and structural reforms. While space fiscal tightening in 2024, with the fiscal account registering an for monetary policy intervention remains restrained, fiscal policy estimated surplus of 1.8 percent of GDP. Execution of public in- could still support growth especially through investment to close vestment was constrained by regulatory and land clearance de- emerging infrastructure gaps. Building on recent reforms, such lays while the government continued its planned annual savings as the revision of Law on Credit institutions, further steps to in recurrent expenditures. mitigate financial sector risks and vulnerabilities remain crucial to promote financial sector resilience and stability. Accelerating structural reforms to strengthen the regulatory environment in Outlook critical backbone services (information and communication tech- nology, electricity, transport), to green the economy, build human Viet Nam’s GDP growth is forecast to moderate to 5.8 percent in capital, and improve the business environment are crucial to sus- 2025 due to increased trade policy uncertainty. While real estate tain long-term growth. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 8.5 5.1 7.1 5.8 6.1 6.4 Private consumption 7.9 3.4 6.6 6.3 7.0 7.0 Government consumption 3.0 4.6 4.0 5.5 4.9 2.5 Gross fixed capital investment 5.9 4.6 7.3 6.1 7.5 7.7 Exports, goods and services 6.2 -2.5 15.5 6.2 8.7 9.0 Imports, goods and services 3.5 -4.5 16.1 6.8 9.5 9.5 Real GDP growth, at constant factor prices 8.8 5.3 7.3 5.9 6.0 6.3 Agriculture 3.7 3.9 2.7 3.0 3.0 3.0 Industry 8.2 3.7 9.1 6.0 6.5 6.5 Services 10.7 6.9 6.9 6.4 6.2 6.8 Employment rate (% of working-age population, 15 years+) 72.0 71.8 71.6 71.5 71.3 71.0 Inflation (consumer price index) 3.1 3.2 3.5 3.5 3.5 3.5 Current account balance (% of GDP) 0.3 6.0 1.9 1.6 1.7 2.1 Net foreign direct investment inflow (% of GDP) 3.7 4.6 4.4 4.3 4.3 3.9 Fiscal balance (% of GDP) 0.7 -2.3 1.8 -2.2 -1.8 -1.6 Revenues (% of GDP) 18.9 17.0 18.4 16.4 16.2 16.0 Debt (% of GDP) 36.9 36.6 37.5 36.9 35.0 33.8 Primary balance (% of GDP) 1.7 -1.5 2.7 -1.2 -0.8 -0.6 1,2 International poverty rate ($2.15 in 2017 PPP) 1.0 0.9 0.9 0.9 0.8 0.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.2 4.0 3.8 3.6 3.4 3.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 19.7 19.1 18.2 17.5 16.8 16.1 GHG emissions growth (mtCO2e) 6.1 4.4 6.1 5.0 5.3 5.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2016-VHLSS and 2022-VHLSS. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2016-2022) with pass-through = 0.7 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 35 MPO