Asia Regional Integration Center

Infrastructure investment propelled growth in the Federated States of Micronesia (FSM) in 2017. The economy recovered from a slight contraction last year to 2.0% growth. Despite a temporary suspension of US grants, public investments picked up moderately. Driven by higher fuel prices and their spillover effects on consumer goods such as clothing and processed food, inflation was at 1.0% last year. The current account surplus also narrowed, due to an increase in imports of construction materials and fuel for public investments.

GDP growth in the FSM is projected to remain stable. Although unspent compact infrastructure grants present an opportunity to reinvigorate the economy, public investments are projected to increase only gradually because of limited project implementation capacity