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Title page

Contents

Executive summary 3

Preface and acknowledgements 6

Acronyms 7

PART 1. Economic overview: Slow global recovery and enduring challenges in the Pacific 10

1.1. Global and regional context 11

1.2. Recent economic developments 15

1.2.1. Growth 15

1.2.2. Inflation 21

1.2.3. Fiscal and debt dynamics 24

1.2.4. Monetary policy and the financial sector 26

1.2.5. External sector 27

1.3. Pacific economic outlook 29

1.3.1. Growth outlook 29

1.3.2. Medium-term growth prospects 34

1.3.3. Inflation 35

1.3.4. External sector 37

1.3.5. Risks 38

1.3.6. Policy considerations 40

PART 2. Investing in people: The Pacific's most valuable asset 51

2.1. The region's basic learning deficit 52

2.2. Better teaching is needed to improve student learning 54

2.2.1. Some education systems are struggling to attract enough teachers 55

2.2.2. Many teachers are not using effective teaching practices and a key unknown is whether teachers master the content they are teaching 55

2.2.3. Teacher behavior often does not support learning 58

2.2.4. More than half of teachers expected to be employed in 2035 have already been recruited, so focusing on existing teachers is critical 58

2.3. The way forward 60

2.3.1. Mechanisms to make teaching more attractive and selective 60

2.3.2. The right training and tools can enhance teaching capacity 61

2.3.3. Incentives can motivate greater teacher effort 64

2.3.4. Teachers cannot do it on their own 65

2.3.5. Aligned efforts across a range of stakeholders is needed 65

Annex 1: Grouping analysis of the PIC-11 66

Annex 2: Non-monetary dimensions of poverty 68

References 69

Table 1. PIC-11 growth forecast summary 29

Table 2. PIC-11 growth forecast 31

Table 3. Pacific Consumer Prices 36

Table 4. Fiscal rule and medium-term debt strategies in the Pacific islands 42

Figure 1. GDP Growth 11

Figure 2. Inflation and policy rates 13

Figure 3. Global commodity prices 14

Figure 4. GDP Growth 15

Figure 5. Visitor arrivals in Fiji 16

Figure 6. Measures of real output 21

Figure 7. Consumer price inflation 22

Figure 8. Fiscal balance and revenue (percent of GDP) 24

Figure 9. General government debt (percent of GDP) 25

Figure 10. Policy rates and bank lending-deposit rate spreads (percentage points) 27

Figure 11. Current account (share of GDP) 28

Figure 12. PIC-11 real GDP growth projections 30

Figure 13. Pacific real GDP growth projections (long-term) 32

Figure 14. PIC-11 GDP growth 32

Figure 15. Growth in the Pacific islands since 2000 34

Figure 16. Inflation 36

Figure 17. Poverty outlook and simulations with different growth scenarios, 2019-26 39

Figure 18. In nine out of 11 Pacific island countries, more than half of students are not meeting international benchmarks in reading 53

Figure 19. Teachers are central to student learning 54

Figure 20. Many teachers in the Pacific need to strengthen their use of teaching practices that are known to help students learn 56

Figure 21. Teacher content knowledge is often weak: Examples from Lao PDR and Indonesia 57

Figure 22. Teacher training programs do not employ practices linked to improved student learning 58

Figure 23. The majority of those expected to be teaching in 2030 have already been recruited 59

Figure 24. Impact evaluation of in-service teacher training programs in the region shows that it can lead to better learning outcomes: Example from Tonga's Come... 61

Figure 25. Computer assisted learning programs have helped improve student learning in the East Asia and Pacific regions 63

Boxes

Box 1. Grouping of the Pacific island countries 18

Box 2. The compact agreement in the North Pacific 33

Box 3. Sovereign wealth funds in the Pacific 44

Box 4. Services trade restrictions 47

Boxes Tables

Table B3. List of Pacific sovereign wealth funds islands 44

Boxes Figures

Figure B1. Income sources and GDP growth 19

Figure B2.1. Compact transfers, FY10-FY43 (% of GDP) 33

Figure B2.2. Compact transfers, FY23 and FY24 (% of GDP) 33

Figure B3. The size, performance, and management fees of Pacific SWFs 45

Figure B4.1. STRI outcome in the PICs by Broad Sector 47

Figure B4.2. Individuals using the internet 49

Figure B4.3. Population covered by mobile networks 49

Figure B4.4. Cost of internet connectivity 49

Figure B4.5. ICT regulatory environment 49

Annex Tables

Table A1. Regression of PIC-11 output 66

Table A1.1. Characteristics of the PIC-11 countries 67

Annex Figures

Figure A1/Figure A2. Non-monetary dimensions of poverty in Pacific island countries, circa 2020 68

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