Economic Review, FSM, FY 2024
Economic Review, FSM, FY 2024 (PDF). Honolulu, HI: Pacific and Virgin Islands Training Initiatives (PITI-VITI). May 2025.
- Has attachment: File:QINQ62UI.pdf
Abstract: This report provides an integrated assessment of economic performance, fiscal structure, and policy challenges in the Federated States of Micronesia (FSM) during the final phase of the 2003 Amended Compact and the transition to the 2023 Amended Compact. It finds that long-run growth has been weak and volatile, averaging only 0.3 percent, with economic activity heavily dependent on external funding, infrastructure spending, and sovereign rents rather than private sector development. The economic impact of COVID-19 was relatively modest due to large inflows of aid, but underlying structural weaknesses persisted, including declining employment and a shrinking population driven by significant out-migration. 
The report highlights major structural imbalances, including uneven state-level performance, heavy reliance on fisheries revenues, and a persistent divide between a fiscally strong National Government and constrained State governments, partially addressed by recent constitutional changes reallocating fishing revenues. It identifies inefficiencies in key sectors, particularly the fisheries regime (where discounted access arrangements may reduce national revenue), the financial system (characterized by high liquidity but limited lending), and state-owned enterprises, especially in utilities and telecommunications. Weak data systems, including the absence of reliable GDP statistics due to halted inter-agency data sharing, are identified as a critical constraint on policymaking and economic monitoring.
The 2023 Amended Compact introduces increased funding, new reporting requirements, and significant changes to trust fund arrangements, improving short- to medium-term fiscal capacity but leaving long-term sustainability uncertain, particularly under market risk. Economic projections suggest modest growth driven largely by public spending and infrastructure investment, with limited private sector expansion. The report concludes that while the outlook has improved, sustained development will depend on structural reforms, including tax modernization, strengthened public financial management at the state level, improved investment climate, and more effective use of fisheries and infrastructure resources.
