Despite being a small contributor to global output (1.7% in 2010), the Pacific countries anchored by Australia and New Zealand appear to be defying the economic pain of the developed West. The region of 16 countries expects to record a GDP growth rate of 5.0-6.0% in 2011.
Although Australia and New Zealand average a growth rate of 2.0% between them, Timor-Leste and Papua New Guinea expect to register 10.0% in 2011. The region's growth rate for 2012 is estimated to be lower at around 4.0%.
This is significant in view of IMF's indication that it may have to trim its growth forecast for the world in January. In September 2011, IMF projected a global growth rate of 4.0% for 2012 compared to over 5.0% in 2010. The global GDP growth rate in 2011 is also estimated to be around 4.0%. Global financial turmoil and the crisis in Europe, largely responsible for sluggish global growth, have prompted the IMF to re-visit the growth estimates.
Australia and New Zealand form the fulcrum and power the region. These two countries, which are miles ahead on the development curve and significantly larger than the minnows in the region, also have a developed services sector. However, commodities and tourism continue to be the mainstay of the smaller economies of the region.
Australia (minerals), Papua New Guinea (minerals), Fiji (minerals) and Timor-Leste (petroleum) are riding the commodity boom essentially fueled by strong Asian demand.
But Australia was hurt by the floods in Queensland, where miners Rio Tinto Plc. ( RIO ), BHP Billiton Ltd ( BHP ), Xstrata plc and Vale S.A. ( VALE ) have major operations. However, with the region's trading partners finding the going tough, sustaining the growth momentum looks difficult in 2012.
These smaller countries have underdeveloped financial systems, high inflation and are largely one-sector economies. However, they appear to be funding their economic needs principally from internal resources and have therefore been able to escape the economic contagion raging across the world. Perhaps, being small and self-reliant helps in troubled times!
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.