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Country Highlights

Micronesia: Economic Challenges and Opportunities

As a small island nation— Micronesia likely faces constraints around limited natural resources, reliance on imports, infrastructure gaps and exposure to climate change impacts. However— tourism, fisheries and agriculture may provide growth opportunities if sustainably developed.

Micronesia faces significant economic challenges which are including- a decline in gross domestic product (GDP) due to remittances, the energy crisis, and climate-related weather conditions. The country is also grappling with the spillover effects of the COVID-19 pandemic, which have significantly impacted households, the economy and public finances. These challenges have exposed the vulnerabilities of Micronesia’s economy, highlighting the need for reforms to enhance competitiveness and reduce vulnerabilities to future shocks.

Despite these challenges— Micronesia presents opportunities for economic growth and development. The country has been implementing an ambitious reform agenda, including measures to improve the business environment, reduce corruption and align with international standards.

Micronesia’s strategic location, close economic ties to the United States and access to the Asia-Pacific market make it an attractive destination for businesses and investors. The country has also been working to diversify its economy, with a focus on the tourism and fisheries sectors, which have significant growth potential.

The islands have few commercially valuable mineral deposits, and the potential for tourism is limited by isolation, lack of adequate facilities and limited internal air and water transportation. The economy of Micronesia largely depends on fishing, subsistence farming and the government sector; with the government employing two-thirds of the adult working population and receiving funding largely from the United States.

Micronesia’s government has been working with international organizations, including the International Monetary Fund (IMF), to mitigate the socio-economic impacts of the COVID-19 pandemic and promote economic growth and development. The IMF has provided financial assistance to Micronesia to support the government in mitigating the socio-economic impacts of the pandemic.

Micronesia faces significant economic challenges, but the country is working to address them through reforms, diversification, and international support. Micronesia presents opportunities for economic growth and development, particularly in the tourism and fisheries sectors, and its strategic location and access to the Asia-Pacific market make it an attractive destination for businesses and investors.

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Featured Reports

Understand the macroeconomic situations that affect the global positioning of countries.

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