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Background Information about Palau

Author: IFAD



Economic Background
Palau’s GDP was estimated at USD 170m in 2010 and the World Bank (2012) shows that its per capita income was USD 7,250. Data from the World Bank (2012) indicates that the economy had grown by an average rate of 0.66% in the last ten years but in 2011, there has been a massive rebound of about 5.8% due to tourism related activities. The IMF (2012b) states that economic growth is expected to be favourable for 2012 (3%) and would average 2% over the medium term. Being highly dependent, the economy remains vulnerable to external shocks and has limited capacity to counter these risks. Compact aid from the US is expected to end in 2024. It averaged about 25% of GDP and tourism contributes close to 50% (highest in tourism dependent states in the world). Population estimate indicates that 20,643 people resided in Palau in 2011, which is a marginal increase from its 2005 population count. Data show that the annual rate of natural increase is 0.6%. Services make-up about 86% of GDP, followed by manufacturing (8%) and an insignificant agricultural sector seems to be under-represented in the official statistics. Palau ranks 49 (the best of PICs) on the global HDI scale with an HDI value of 0.782 in 2011. This is an improvement from its 2009 score of 0.777, UNDP (2012).

Baseline Poverty Analysis
According to the 2006 HIES data, about 25% of population live below the BNPL, while the poverty gap is estimated at 7%. The poorest quintile’s share of consumption was 10% in 2006. Rural-urban differences in the level of poverty are minimal in Palau. The high cost of living and relatively low wages of immigrant workers in the tourism sector push these households below the BNPL. The GFC also affected adversely through the fall in tourism demand. Palau has a low prevalence of underweight children and no evidence of food poverty in young population. However, malnutrition is widespread due to poor diet practices.

The role of rural women is to produce household food requirements through backyard gardening, household activities and child care. Palau has high net enrolment, survival and literacy rates. Public education is free at all levels and Government expenditure on education was around 11% of GDP (in 2007). There is gender parity in education. About 16% of population is the youths who are expected to have faced hardship due to limited employment opportunities and low economic growth rates.

Agriculture and Rural Development
Agriculture is concentrated on farming and fishing activities but supports livelihoods across the economy and more so in the rural sector which inhabits 23% of total population, MDG report (2012). The sector directly employs about 20% of the national labour force. Palau has a land area of 460 square km and commands over 600,000 square km of EEZ. Tourism would continue to remain the most important source of economic growth, (ADB, 2012) however; most of the hospitality products and food are imported. Therefore, its real economic impact could be increased by creating stronger linkages to agriculture which has potential for fresh produce, fish and some specialty processed products. However, FAO (2012) argues that in order to service this market, local produce must enhance its supply and quality standards. Several constraints affecting agriculture include limited land, biosecurity risks, weak technical capacity, poor linkage and absence of market infrastructure. Livestock is limited to chickens and pigs mainly for subsistence and ceremonial purposes. Local agricultural market activities are small and recently, commercial farmers are exploiting market potential in fruits and vegetables. The marine activities involve large-scale offshore and coastal fishing. The marine sub-sector is a major source of food, exports, employment and tourism development. Aquaculture sector is still in the early stages development (FAO, 2011). Palau is not known for commercial logging. Exports are about USD 6 million and imports are unmatched at USD 120 million in 2010, World Bank (2012).

Language:  English (United Kingdom)
Development Themes: Agriculture Food Security & Nutrition
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