Transcript EconMAP FY11 Presentations - PITI-VITI

Graduate School USA, Pacific & Virgin Islands Training Initiatives
FSM Economic Reviews
JEMCO, August 2014
slide 1
FSM Presentation
Economic Performance
Economic Policy
Compact Trust Fund
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 2
REAL GDP & Per Capita GDP
GDP at constant prices
GDP per Capita
$250
$2,700
$2,600
247.5
$2,500
237.8
$240
$2,400
$230
2,332
$2,300
2,293
$220
$2,200
-0.4% GDP Grow th from FY03 to FY13
$210
-0.2% GDP Per Capita Grow th
$200
$2,100
$2,000
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 3
GDP (per capita)
GDP Constant Prices US $millions
$260
Sources of Growth, FY09 to FY13
Domestic Fisheries
Construction
Wholsale & Retail
Education
$'s millions, FY2004 prices
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 4
REAL GDP per Capita by State
Chuuk
Expon. (Chuuk)
Kosrae
Expon. (Kosrae)
Pohnpei
Expon. (Pohnpei)
Yap
Expon. (Yap)
$4,200
Yap
$3,700
.6% Grow th
$3,200
Pohnpei
1.3% Grow th
$2,700
Kosrae
.7% Grow th
$2,200
$1,700
Chuuk
0% Grow th
$1,200
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 5
Net Migration (FY04 to FY12)
FSM
Yap
Pohnpei
-0.4%
Kosrae
-0.2%
Chuuk
0.0%
-0.6%
-0.8%
-1.0%
-1.2%
-1.4%
-1.6%
-1.8%
-2.0%
-7,082
-1,015
-5,334
-1,766
-15,197
-1.6% ANNUALLY
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 6
Net Migration & Net Employment
Net Migration
Net Employment
1,000
1,000
500
500
0
0
-500
-500
-1,000
-1,000
-1,500
-1,500
-2,000
-2,000
-2,500
-2,500
-3,000
-3,000
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 7
Net Migration & Net Employment
Net Migration
Net Employment
1,000
500
300
500
100
0
-100
-500
-300
-1,000
-500
-700
-1,500
-900
-2,000
-1,100
-2,500
-1,300
-3,000
-1,500
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 8
Employment by Sector
Private Sector (lhs)
Public Sector (lhs)
9,000
-1.4% Public Employment Grow th
8,500
During Amended Compact Period
8,000
7,500
7,000
6,500
-0.3% Private Employment Grow th
During Amended Compact Period
6,000
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 9
Real & Nominal Wage Rates
Private Sector Wage Rate
Public Sector Wage Rate
Real Private Sector Wage Rate
Real Public Sector Wage Rate
$12,000
2.0%
avg
-2.3%
avg
2.7%
avg
-1.7%
avg
$10,000
$8,000
$6,000
$4,000
$2,000
$0
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 10
Revenues vs Expenditures
Revenues
Expenditures
us $millions
220
200
$8.7m
su rplus
180
2.8% gdp
160
140
120
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 11
National & All States Fiscal Balance
National Government
State Governments
$15.0
$11.2
$10.0
$7.9
$5.0
$0.0
-$5.0
-$10.0
$11.4m
$18.0m
structural
structural
surplus
FY2012
surplus
FY2013
-$15.0
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 12
External Debt & Debt Service
External Debt, % of GDP
Debt Service, % of Exports
35%
30%
25%
20%
15%
10%
5%
0%
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 13
Growth Scenarios (Real GDP Per Capita)
Dismal Scenario
Actual
$2,500
Dismal scenario based on 0.3% grow th
$2,400
$2,300
$2,200
$2,100
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 14
FSM Policy Issues
Two “Umbrella” Policy Initiatives now driving
the policy regime at national and state levels:
Long-term Fiscal Framework
The 2023 Committee & Forthcoming Action Plan
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 15
Long-Term Fiscal Framework
LTFF drives fiscal policy in each of the 4 states:
Expenditure discipline, including public sector wages
Tax reform remains a work in progress
Structural reforms—if needed
National burden sharing on the table
FY2014 expenditures cuts done; FY17 & FY20 may be
necessary
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 16
2023 Committee Action Plan
Action Plan Forthcoming
National Government revenue buoyancy creates
opportunity
Saving and investing substantial sums from
FY15 – FY23
FSM-wide tax reform likely endorsed
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 17
FSM Policy Issues
PUBLIC SECTOR WAGES—BACKGROUND
Total wage bill had been rising unsustainably from
FY2004 to ~FY2010
Wage bill discipline had varied across five
governments but now stabilized
Wage bill “freeze” alone had not proven to be
effective—broader policy discipline had been required
JEMCO Resolution freezing wage levels in health and
education now “replaced” by LTFF commitments
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 18
Public Sector Wages
Wage Bill
Public servants
70.0
7,000
65.0
6,500
60.0
6,000
55.0
5,500
50.0
5,000
45.0
4,500
40.0
4,000
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 19
Numbers of Public Servants
Wage Bill US$ millions
FSM
Govt Wage Rates by Fund Source
$14,000
Gen Fund
$13,000
2.6% growth
$12,000
Federal
5.7% growth
$11,000
$10,000
Compact
$9,000
2.2% growth
$8,000
$7,000
$6,000
$5,000
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 20
Revenues: National & All States
National
States
90
80
FY15 VDS $8,000/day
US$ millions
70
FY14 VDS $6,000/day
60
FY12-FY13 VDS $5,000/day
50
85% increase
from 2004
40
30
20
10
0
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 21
FSM Policy Issues
TAX REFORM
Tax reform is an important component of long-term fiscal
management
Clearly: greater local revenue effort results in proportionately
reduced reliance on Compact flows (and Compact Trust Fund
distributions)
Worst-case scenarios considered through the LTFF process would
be mitigated in the presence of enhanced revenue efforts
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 27
Impact of Tax Reform
Real Reduction vs Tax Reform Revenue
FY13 to FY23:
(A) REAL
Reduction
(B) Tax Reform
Revenue
(B) as % of (A)
National
-$1.1
$1.9
166%
Chuuk
-$4.4
$1.7
39%
Kosrae
-$1.3
$0.5
40%
Pohnpei
-$2.9
$5.5
189%
Yap
-$1.8
$2.2
121%
FSM
-$11.5
$11.8
103%
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 28
Impact of Tax Reform
Legislative Status of FSM Tax Reform
Import
VAT rate
R
GRT
Repeal
R
URA
RAA
MOU
NPT
P
Lp
P
R
Chuuk
P
P
P
Kosrae
P
P
P
Pohnpei
R
P
R
Yap
R
P
R
National
Passed
Required
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
Not Required
VAT
Lapsed
slide 29
FSM Policy Issues
LONG-TERM FISCAL FRAMEWORK: STATES
LTFF operational for second year—monitoring matrix being
scrutinized across governments
FY15 and FY16 allow for modest inflation
FY17 calls for “contingent” expenditure cuts of ~6% in absence
of major changes (growth, revenue reform, burden sharing)
Dilution vs Strategic Consolidation (was LTFF effective?)
 Technical improvements need to be addressed prior to next
round of participatory actions
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 30
FSM Policy Issues
LONG-TERM FISCAL FRAMEWORK: NATIONAL
National government faces a different fiscal picture: revenue
buoyancy
Sensible options were identified as:
1. Saving for the future to reduce burden of adjustment—CTF
2. Tax reform and modified revenue/grant formulas with the
states (gradually)
3. Investing (effectively) to reduce cost structure for state
delivery of health and education services
4. Investing (effectively) in economic infrastructure to support
private sector growth
2023 Action Plan May Meet/Exceed JEMCO expectations… tbd
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 31
FSM Compact Trust Fund
OBSERVATIONS
Recent strong market performance has improved
outlook, but challenges remain for FSM especially;
Looming need to focus on “distribution policy” per TF
Agreement Article 15(1).
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 32
FSM Compact Trust Fund
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 34
FSM Compact Trust Fund
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 35
FSM Compact Trust Fund
Graduate School USA
Pacific Islands Training Initiative
www.eco n m ap .or g
slide 36
Graduate School USA, Pacific & Virgin Islands Training Initiatives
Questions or Comments?
JEMCO-JEMFAC, August 2012
slide 61