The latest estimates of the World Bank (2012) indicate that FSM’s GDP was USD 318m and on a per capita basis was USD 2,166 in 2011. The per capita GNI was slightly higher at USD 2,898. Aggregate output has only slightly increased by an annual rate of 0.6% in the last ten years but the growth rate was 4.5% in 2011. The 2010 Census estimated a total population of 102,624 which represented an annual decline of about 0.4% from the previous census. While declining fertility has contributed somewhat, the net out-migration is the primary cause is this downward trend. The World Fact book (2012) shows that 56% of GDP is contributed by services, some 29% by agriculture, and manufacturing remains the smallest section of FSM’s economy in 2004. The major economic activities include: tourism, fish processing and handicraft. FSM exports fish, black pepper, pearl, kava and betel nuts. Its major natural resources are forests, marine products, deep-seabed minerals and phosphate.
Baseline Poverty Analysis
UNDP (2008) analysed HIES data (2005) and showed that extent of poverty and hardship was high and had increased in the FSM in the period 1998-2005 mainly due to high cost of living and few opportunities for income generation. In Chuuk and Yap states, subsistence production provides for two-thirds and three-quarters of food consumed by the poorest households. The head count index over all households is estimated at 22.4% but Kosrae has the highest incidence of poverty (27.1% of households and 34.5% of population). In 1998, 27.9% of households were below the BNPL but the comparable figure for 2005 was 31.4%. The national poverty gap index is estimated at 9.3 and its squared value is 4.0, which shows a lower poverty severity than in 1998 (4.8). Measured in per capita adult equivalent terms, the weekly household expenditure of the highest decile households were almost 10 times higher when compared to those in the lowest. The national Gini index in 2005 was 0.27, down from 0.47 (in 1998) and this is a huge improvement in income distribution. The HIES analysis suggests that female-headed households were slightly over-represented in the lowest three expenditure deciles in Chuuk, Pohnpei and Kosrae. Nationally, 20.3% of households were reported as being headed by females. Females are, however, also slightly over-represented (21.8%) in the highest quintile. The analysis indicates that although about 45% of all children live in Chuuk, it accounts for about 50% of those that live in the poorest households. At the national level, some 7% of household heads are reported to having no education at all. Data show that 23% of the population is in the age group 15-24 years who are vulnerable to poverty due to low potential for income and employment.
Agriculture and Rural Development
Agriculture is a major form of economic activity and livelihood but largely on subsistence level. Total land area is just over 700 square kilometers of which about 3% was arable land. Land under permanent crop is 24.3%. The rest are mostly covered with forests. Cereal yields have increased by 10% and crop production significantly increased by 30% in 2010. Root crops, coconut and tropical fruits are the main staples, in addition to fish and seafood. Pigs and chickens are the predominant livestock. Copra production and exports have declined due to the drop in world market price, inefficiency and ageing coconut palms. Diversification of coconut industry including extensive replanting, strengthening food processing capacity and managing fishing are the major priorities of the Government. Extensive forest still exists in each state but timber is not exported. However, despite the diversity of local foods, fruits and fish, nutrition related diseases have increased due to increasing reliance on imported food. Imports in total outweighed FSM’s exports by a factor of about 10 to USD 165 million in 2010. The value of tuna harvested within the country's EEZ every year is about USD 200 million, but mainly by foreign vessels. Consequently, the FSM earns through the sale of licensing fees. Black pearl and sea cucumber is also increasing in Pohnpei. Climate change is predicted to significantly impact the agricultural sector but a number of mitigation strategies are being piloted by the Government.