The Federated States of Micronesia (FSM) is highly dependent on external aid. Following a recession in FY2006–08, the FSM economy has grown by 2–21⁄2 percent for FY2010 and FY2011. The economy remains dependent on the large public sector, although the fisheries and agriculture sectors have shown signs of growth. Despite some deterioration in current account balance, external balance also has sustained a stable flow of official transfers. However, economic growth is likely to slow in the near term owing to a decline in public sector demand.
The COVID-19 pandemic and related containment measures have put severe strains on the economy. The economic policy response has been strong and generally appropriate, helping counter the negative effects of the pandemic. Nevertheless, as the international borders remain shut, the economic contraction is likely to deepen in FY2021. A slow recovery is expected for FY2022 driven by a gradual border reopening. The FSM is facing significant medium-term uncertainty, owing to the possible expiration of grants and other assistance provided under the Compact Agreement with the United States. The FSM is also highly vulnerable to climate change-induced natural disasters.
Is rising emigration proof of a Pacific Island nation's failure to fulfill its economic promise and provide the jobs that its citizens seek in a modernized society? Or is it a legitimate alternative development strategy that depends on the export of surplus labor in lieu of the more conventional methods recommended by donor nations and international financial institutions? In this report, Francis X. Hezel, SJ, sheds light on these questions by reviewing the 30-year history of migration from one Pacific Island nation, the Federated States of Micronesia (FSM) and examining the current status of its migrants. Hezel reports that although out-migration from the FSM began in small numbers in 1980, the outflow intensified when the Compact of Free Association went into effect in 1986. In return for exclusive strategic access by the United States, the Compact granted FSM citizens free entry into the United States and its territories to establish residence and work. This report traces the growth of the early Micronesian communities on Guam and Saipan, and the subsequent migration eastward to Hawaiʻi and the continental United States. Today, one-third of all people born in the FSM live outside their island nation. Hezel presents the results of a groundbreaking 2012 survey of Micronesian migrants, showing that an ever-increasing segment of the migrant population is putting down roots in the US mainland. There, despite difficulties they encounter, these individuals and families are able to find more plentiful jobs, a reduced cost of living, and an environment without some of the negative stereotypes that grip fellow migrants in Guam and Hawaiʻi. Hezel tracks the changes in their living conditions and shows that even if Micronesian migration continues at the same pace as in the past, it is clear that the living conditions of these FSM citizens are improving, as are their potential contributions to American society and to their friends and family back home.
This 2002 Article IV Consultation highlights that the economic activity in the Federated States of Micronesia (FSM) is estimated to have slowed. Despite the use of the bump-up funds by some of the FSM’s four state governments to boost spending during FY2002, GDP is estimated to have grown only by 0.8 percent. The fiscal stimulus appears to have been mostly offset by an emerging fiscal crisis in Chuuk and a “wait and see” attitude of the private sector in the face of uncertainty associated with the new Compact of Free Association.
This book is a comparative study of a number of dependent and independent tropical islands and archipelagos. Its contributors seek to answer a number of vital questions affecting the security, political status and economic development of some of the world's smallest and most remote communities. Contributions by Robert Aldrich, John Cameron, John Connell, Fred Constant, Henrique Pinto da Costa, Mike Faber, David Hamilton-Jones, Helen M. Hintjens, Jean Houbert, David Lowenthal, David Marlow, Malyn Newitt and Gordon Titchener
