Coping with vulnerability by building economic resilience : the case of Vanuatu

Abstract

The objectives of this chapter are twofold, namely (i) to analyse the causes behind the economic vulnerability of Vanuatu and (ii) to evaluate the efforts of this small island state to build up economic resilience in order to achieve economic growth and higher living standards. It is well known that a number of inherently vulnerable small states have, through good governance and appropriate economic policies, succeeded in withstanding the impact of external shocks and registered acceptable rates of economic growth. There is no reason why Vanuatu cannot do the same. This chapter shows that in Vanuatu, man-made policies, including fiscal inflexibility and poor governance, have exacerbated the drawbacks associated with economic vulnerability. The chapter argues that Vanuatu will always remain inherently vulnerable, and it is therefore important that economic policy in this island state be geared towards strengthening economic resilience to cope with vulnerability. Good governance and sound macroeconomic policies are singled out for this purpose.