Republic of Palau

Palau, a small state in the Pacific, is heavily dependent on tourism and grants. Economic activity slowed down significantly due to lower tourism over the past two years. Growth is expected to pick up with a rebound in construction activities and tourism from FY2018 through 2020. The overall fiscal balance remained in surplus primarily owing to low capital expenditure and expected to improve further with the disbursement of the recently-ratified Compact grants. The outlook is generally favorable although subject to downside risks.