Economy in Marshall Islands

The government is the largest employer employing 34% of the workforce. GDP is derived mainly from payments made by the United States under the terms of the Compact of Free Trade Association. Direct U.S. aid accounted for $40 million of the Marshalls' 1992 budget of $65 million. The economy combines a small subsistence sector and a modern urban sector. The subsistence sector on the outer islands is fueled by the production of copra and handicrafts. The modern service-oriented economy is located in Majuro and Ebeye. It is sustained by government expenditures and the U.S. Army installation at Kwajalein Atoll which gives a boost to the economy in its own right. The airfield there also serves as a national hub for Air Marshall Islands. The modern sector consists of wholesale and retail trade restaurants banking and insurance construction and repair services professional services and copra processing. Copra cake and oil are by far the nation's largest exports. At $1.8 million copra accounted for 79% of 1989 exports. Copra production the most important single commercial activity for the past 100 years now depends on government subsidies however. The subsidies more a social policy than an economic strategy help reduce migration from outer atolls to densely populated Majuro and Ebeye. Marine resources including fishing opening a cannery and aquaculture as well as tourism development and agriculture are top government development priorities. The Marshall Islands is working to establish a fishing fleet and sells fishing rights to other nations as a source of income. As a small nation the Marshall Islands must import a wide variety of goods including foodstuffs consumer goods machinery and petroleum products.

Economy—overview: US Government assistance is the mainstay of the economy constituting an important supplement to GDP. Agricultural production is concentrated on small farms and the most important commercial crops are coconuts tomatoes melons and breadfruit. Small-scale industry is limited to handicrafts fish processing and copra. The tourist industry now a small source of foreign exchange employing less than 10% of the labor force remains the best hope for future added income. The islands have few natural resources and imports far exceed exports. The government is drafting economic reforms designed to increase revenue and compensate for reductions in US Government grants—in FY95/96 the US Government provided grants of $68 million equal to roughly 70% of the country's GDP. More than 25% of the government's FY95/96 budget was devoted to debt repayment. In 1996 efforts to stabilize the economy included a 27% reduction in the government's work force and a 10% cut in the budget.

GDP: purchasing power parity—$98 million (1996 est.)

GDP—real growth rate: 2% (1996 est.)

GDP—per capita: purchasing power parity—$1 680 (1996 est.)

GDP—composition by sector:

agriculture: 15%

industry: 13%

services: 72% (1995)

Inflation rate—consumer price index: 4% (FY95/96)

Labor force:

total: 4 800 (1986)

by occupation: NA

Unemployment rate: 16% (1991 est.)

Budget:

revenues: $80.1 million

expenditures: $77.4 million including capital expenditures of $19.5 million (FY95/96 est.)

Industries: copra fish tourism craft items from shell wood and pearls offshore banking (embryonic)

Industrial production growth rate: NA%

Electricity—capacity: 16 000 kW (1994)

Electricity—production: 57 million kWh (1994)

Electricity—consumption per capita: NA kWh

Agriculture—products: coconuts cacao taro breadfruit fruits; pigs chickens

Exports:

total value: $17.5 million (f.o.b. 1996 est.)

commodities: fish coconut oil fish trochus shells

partners: US Japan Australia

Imports:

total value: $71.8 million (c.i.f. 1996 est.)

commodities: foodstuffs machinery and equipment fuels beverages and tobacco

partners: US Japan Australia NZ

Debt—external: $128 million (FY95/96)

Economic aid:

recipient: under the terms of the Compact of Free Association the US is to provide approximately $68 million in aid annually

Currency: 1 United States dollar (US$) = 100 cents

Exchange rates: US currency is used

Fiscal year: 1 October—31 September