Tuvalu - Economy

Economy

From 1996 to 2002, Tuvalu was one of the best-performing Pacific Island economies and achieved an average real gross domestic product (GDP) growth rate of 5.6 per cent per annum. Since 2002 economic growth has slowed, with GDP of 1.5% in 2008. Tuvalu was exposed to rapid rises in world prices of fuel and food in 2008, with the level of inflation peaking at 13.4%. The International Monetary Fund 2010 Report on Tuvalu estimates that Tuvalu experienced zero growth in its 2010 GDP, after the economy contracted by about 2% in 2009.

Public sector workers make up about two-thirds of those formally employed. Approximately 15% of adult males work as seamen on foreign-flagged merchant ships. Tuvaluans are otherwise involved in traditional subsistence agriculture and fishing.

Tuvalu generates income from the Tuvalu Trust Fund, the commercialisation of the ‘.tv’ top level domain, fishing licences, the sale of stamps and coins, remittances from Tuvaluans living in Australia and New Zealand, and remittances from Tuvaluan sailors employed on overseas ships.

In 1998, Tuvalu began deriving revenue from the use of its area code for premium-rate telephone numbers and from the commercialisation of its ".tv" Internet domain name, which is now managed by Verisign.

The Tuvalu Trust Fund was established in 1987 by the United Kingdom, Australia and New Zealand. The value of the Tuvalu Trust Fund is approximately $100 million.

Australia and New Zealand continue to contribute capital to the Tuvalu Trust Fund and provide other forms of development assistance. The US government is also a major revenue source for Tuvalu, with 1999 payments from the South Pacific Tuna Treaty (SPTT) at about $9 million, which is expected to rise annually. The SPTT entered into force in 1988 with the current SPTT agreement which expires 14 June 2013. Financial support to Tuvalu is also provided by Japan, South Korea and the European Union.

The United Nations designates Tuvalu as a ‘Least Developed Country’ because of its limited potential for economic development, absence of exploitable resources and its small size and vulnerability to external economic and environmental shocks.

Due to the country's remoteness, tourism does not provide much income; a thousand tourists are estimated to visit Tuvalu annually.