MANILA, PHILIPPINES - The recovery in the global economy will help the Pacific economies improve in 2011.

The strongest gains are expected in the resource-rich countries that are benefiting from both major new resource projects and better world commodity prices, says the Asian Development Bank's (ADB) Pacific Economic Monitor.

The report, released today, projects that the 14 economies of the Pacific will expand by 6.3% in 2011, up from 5.3% last year. The resource-rich Papua New Guinea (PNG) and Timor-Leste are forecast to grow by 8.5% and 10% respectively, fuelled by the benefits of liquefied natural gas and petroleum developments. The resumption of gold exports and a stronger forestry sector will expand the Solomon Islands economy by 7.5% in 2011, while phosphate exports will help Nauru return to moderate economic growth.

Excluding the economies of PNG and Timor-Leste, the Pacific Economic Monitor estimates the Pacific Island economies will grow by 1.7% this year, an improvement from the 0.8% expansion of last year.

"Overall, the Pacific economy is doing better thanks to improved world economic conditions," said Robert Wihtol, Director General of the ADB's Pacific Department. "However, this masks sharply different performances across the region. The resource-rich economies are well placed to record high rates of economic growth but the smaller and more remote economies are exposed to the costs from rising world fuel and food prices."

The report projects inflation of 4% in the Pacific Island economies (excluding PNG and Timor-Leste) this year and 6.5% in the Pacific as a whole. It warned of the risk of even higher inflation if global commodity prices remain at recent highs.

"Learning from the 2008 experience of high commodity prices, the Federated States of Micronesia, Kiribati, Marshall Islands, Palau, and Tuvalu are at most risk from the inflationary effect of higher world commodity prices," said Mr Wihtol.

The region should see an increase in tourism and some recovery in wage remittances this year on the back of an improved outlook for the economies of Australia and New Zealand, the source of most visitors and remittances to the Pacific. The Cook Islands, Fiji Islands, Samoa, Tonga, and Vanuatu stand ready to gain the most from these improvements.