SYDNEY, AUSTRALIA - Countries in the Pacific region are expected to post overall average economic growth of 3.7% in 2010, up from 2.3% in 2009, according to a forecast by the Asian Development Bank (ADB).

However, growth is expected to remain generally low in most of the Pacific. Excluding Papua New Guinea (PNG) and Timor-Leste, the economies of ADB's Pacific developing member countries are expected to expand by only 0.5% overall in 2010, after contracting by an estimated 1.4% in 2009.

The Asian Development Outlook 2010 (ADO 2010), ADB's flagship annual economic publication released today, says that 13 of the Pacific island economies covered in its report will begin to grow again in 2010. Though the increase is expected to be relatively small, it would nevertheless be a marked improvement over 2009, when seven of them contracted.

In its seventh consecutive year of growth, Vanuatu is expected to remain the best- performing in 2010. This year economic growth is expected to accelerate to around 4.6%, due to gains in construction and tourism, up from nearly 4% in 2009.

Reflecting the stronger than expected performance of the global economy, ADO 2010 upgrades growth forecasts presented in September 2009. The improvement in the global economy is helping lift tourism to the Pacific region, prices it receives on its commodity export are higher, and returns on offshore investment are up. This is lifting business confidence.

"The increase in growth rate for the Pacific region in 2010 is largely driven by resource-rich PNG and Timor-Leste, which are now spending savings accumulated during the commodity boom. The improvement in the global economy will also help Pacific economies perform better," says Cecile Gregory, Officer-in-Charge of ADB's Pacific Department.

Many of the Pacific island governments are still feeling the impact of the economic slowdown on their tax revenue, so fiscal pressures remain. Those pressures are particularly intense in the Fiji Islands, Marshall Islands, Samoa, Solomon Islands, and Tonga.

"While economic recovery in the Pacific may be in sight, it must be noted that some developed economies central to the Pacific's growth remain at risk of faltering. Governments must remain vigilant in their efforts to help guide the Pacific economies to firmer economic ground," says Jong-Wha Lee, ADB's Chief Economist. "Managing the fiscal pressures still being felt in the region will be key to sustaining economic recovery."

The recent rise in global oil prices is expected to keep inflation moderately high in 2010, with 5.1% expected in the region as a whole.