Palau - Economy

The economy has a narrow production base as a result of limited natural resources and few skilled personnel. The services sector consists largely of government administration and trade. Large gaps exist between government revenues and expenditures and between imports and exports. These gaps are financed largely by grant assistance from the United States. Unemployment is a major problem. Recently, expansion of air travel in the Pacific has fueled growth of the tourist sector. Tourist arrivals number 50,000 in 2000/01, down a from a peak of 66,441 in 1996/97. Long-run prospects of the tourist sector have improved with the

LOCATION: 131° to 135° E; 3° to 8° N.
LOCATION: 131° to 135° E ; 3° to 8° N.

development of Pacific air travel. Real GDP growth slid precipitously after booming post-independence rates of 24.3% in 1994/95 and 18.1% in 1995/96. In 1996/97 growth moderated to 5.5%, but in the wake of the Asian financial crisis, the economy contracted 5.4% in 1997/98. The economy remained flat in 1998/99, and 1999/00, the last years for which reliable data is available, with growth rates of 1.1% and 1%, respectively. The Compact Trust Fund balance, at $70.8 billion at independence, reached $161.8 billion by 1999/00, but had fallen to $135 billion in 2000/01.

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