Asia Regional Integration Center

Economic growth slowed down to 4.0% in 2017 as some of its main economic activities, including phosphate exportation and service provision related to the Regional Processing Center (RPC)— that processes asylum seekers on behalf of Australia—both showed lackluster performance. The service sector provided an estimated 75% of GDP in 2017, with 35% of GDP coming from activities related to the RPC.

The economy is expected shrink by 3% in 2018 and grow by 0.5% in 2019 as activities related to RPCs are being scaled down, and as readily-accessible phosphate deposits are continuously declining. On a positive note, the country is expected to receive stable fishery revenue and low inflation rates. In addition, the planned construction of a seaport starting 2019 is expected to partly offset the decline in RPC activity. A downside risk then comes from a delay in the port construction, while an upside risk comes from a delay in scaling down the refugee processing activities.