Swift implementation of containment measures, limited spillovers from tourism, and COVID-related fiscal spending financed by buoyant fishing revenues and donor grants have allowed Tuvalu—a fragile Pacific micro-state—avoid a recession in 2020. The economy is expected to expand by 2.5 percent in 2021, supported by fiscal expenditures and resumption of infrastructure projects. But significant challenges remain: Tuvalu is vulnerable to the effects of climate change, its economy is dominated by the public sector, and its revenue base is narrow. Uncertainty around donor commitments complicates fiscal planning.

The 2023 Article IV Consultation discusses that a successful vaccination strategy allowed Tuvalu to lift coronavirus disease (COVID) containment measures at the end of 2022, but the economic cost of the pandemic has been significant. Real gross domestic product growth was -4.3 percent in 2020, with at-the-border containment measures leading to delays in much-needed infrastructure projects. Growth is expected to accelerate as the lifting of COVID restrictions leads to the resumption of construction activity, shipping bottlenecks ease and the trade and hospitality sectors recover. Tuvalu is among the countries most vulnerable to the effects of climate change; its remote economy is dominated by the public sector; and its revenue base is narrow, with reliance on donor commitments further complicating fiscal planning. The economic setback due to the pandemic makes addressing these significant structural challenges more difficult. The report recommends promoting fiscal sustainability and building buffers by mobilizing revenues and rationalizing current expenditures.

Tuvalu is a fragile micro state. The country’s remoteness, narrow production base, and weak banking sector constrain private sector activity, leaving public expenditure as the main source of growth. The DSA finds that Tuvalu remains at high risk of debt distress.

Early and decisive measures successfully prevented an outbreak of COVID-19 in Nauru, and as of January 2022 there have been no COVID-19 cases on the island. Strong pandemic policy measures supported the economy, which continued to expand in FY20 and FY21. Nauru’s remoteness and size constrain potential growth and it is severely exposed to the negative effects of climate change on sea levels and the ocean stock of tuna. Development challenges are exacerbated by limited capacity and a high incidence of non-communicable diseases (NCDs).

While the non-mining sector was severely impacted by the COVID-19 crisis, overall growth in Guinea remains strong, reaching 7 percent in 2020, driven by booming mining production. Inflation exceeded 12 percent as a result of COVID-related supply disruptions and the ongoing monetary and fiscal response. The already weak social indicators have deteriorated further.

In Turkey, as in other countries, the human and economic toll of the COVID-19 pandemic has been severe. Thousands of lives have been tragically lost and many livelihoods compromised. The initial policy response to the pandemic—and subsequent sharp growth rebound—set Turkey apart from its peers. Rapid monetary and credit expansion and large liquidity support meant that Turkey was among the few countries to experience positive economic growth in 2020. But these policies also aggravated pre-existing economic and financial vulnerabilities. Higher inflation, increased dollarization, and a large shift in the current account position increased pressure on the lira and gave rise to heavy foreign exchange sales, which led in turn to steep reserve declines from already-low levels. A policy shift in late 2020—mainly towards tighter and more transparent monetary policy and slower credit growth—was both welcome and necessary. But the durability and depth of the shift were called into question in March 2021, following the change in central bank leadership, as the lira weakened markedly and interest rate spreads widened.

While the non-mining sector was severely impacted by the COVID-19 crisis, overall growth in Guinea remains strong, reaching 7 percent in 2020, driven by booming mining production. Inflation exceeded 12 percent as a result of COVID-related supply disruptions and the ongoing monetary and fiscal response. The already weak social indicators have deteriorated further.

Strong health and economic policies allowed for quick economic recovery from initial COVID-19-related lockdowns in 2020. Renewed outbreaks and lockdowns have created setbacks since mid-2021, with disproportionate impacts on some regions, sectors, and workers. Accommodative macroeconomic policies have been instrumental in cushioning the economic impact.

High frequency estimates suggest a V-shaped recovery with output now poised to return close to 2019 levels already this year, much earlier than expected. Recently COVID-19 case numbers have risen sharply to new highs while vaccinations have also accelerated significantly after a slow start. The recovery has improved the fiscal outlook and the authorities submitted to Parliament a supplementary budget, with GEL 1.2 billion in additional spending roughly equivalent to the expected increase in revenues. The National Bank of Georgia (NBG) has increased the policy rate by 200 basis points to deal with high inflation driven by lagging effects of depreciation, commodity and food price increases, and supply side constraints.