Although Micronesia will continue to be hampered economically by its isolated location, small geographical area, and population size, it has the enormous benefit of the generous financial support of the United States. The level of this support is undergoing renegotiation, with the United States offering $74 million a year and Micronesia requesting $84 million. Even at the lower level of support, this would secure Micronesia's living standards for the next 15 years of the agreement (the level of U.S. assistance in 2000 was $79 million).
Micronesia had a positive GDP growth rate in 2000 of 2.5 percent, and although this is encouraging in view of the negative growth rates recorded from 1996 to 1999, it is still below the population growth rate of 3.3 percent a year. There is pressure on the government from the IMF to reduce expenditures and increase revenue collection to maintain the budget surplus achieved since 1996, and to maintain the current low inflation rate (2.8 percent in 2000). The government has announced a privatization program to try to improve efficiency in the economy, and this is to be supported by loans from the Asian Development Bank
Fisheries is targeted as one the industries presenting the greatest potential for growth in the private sector. The fishing industry should see improvements in the near future as Japan is funding a $2.8 million project to train fishermen in Micronesia. However, both Taiwan and Japan are seeking to reduce the license payments they make for fishing in Micronesia's waters. They argue that the current low price for tuna on the world market makes this necessary, and they also claim that tuna have begun to migrate away from Micronesia's waters to other parts of the Pacific.
Tourism is the second sector with expansion potential. In 2000, the islands received 17,152 visitors. The number of visitors has fallen slightly for each of the past 4 years. Initially, the fall was credited to the Asian financial crisis, particularly affecting the number of Japanese tourists. However, the fact that the fall has continued indicates that there is much to be done in regenerating the sector, and this will require foreign investment in hotels and an international marketing program. A British firm, Travel Research International, has been engaged to promote Micronesia's tourism, concentrating on diving, cultural tourism, deep-sea fishing, and eco-tourism as the main attractions.
In common with many other South Pacific countries, Micronesia is alarmed by the effect continuing global warming will have on its islands. The consequent rise in the level of the oceans threatens low-lying islands with flooding and, eventually, with submergence.