Marshall Islands: Economic Outline

Economic Indicators

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The economy of the Marshall Islands is closely linked to that of the United States, and the U.S. also controls the security and defence of the islands. After growing at a steady pace in recent years, the country’s economy was impacted by the COVID-19 global crisis, with GDP dropping an estimated 2.4% in 2020 and 1.5% in 2021 (IMF). According to the latest forecast from the International Monetary Fund, growth is projected at 3.5% this year and 2.5% in 2023, still below the pre-pandemic average. The country’s economic geography represents a binding constraint to achieving sustainable long-term growth, being characterized by extreme remoteness, small size, geographic dispersion, environmental fragility and limited natural resources.

The country’s debt-to-GDP ratio increased to 14.4% in 2021, from 19% one year earlier, and is expected to float around 15% in the coming years, thanks to grant assistance from development partners (international aid contributes 70% of the state budget), along with government’s own funds from domestic resource mobilization and reprioritization of expenditures. The Marshall Islands also received temporary unemployment assistance from the U.S. under the 2020 Coronavirus Aid, Relief, and Economic Security Act. Nevertheless, sizable budgetary grants under the Compact Agreement of the Republic of Marshall Islands with the United States will be lost with the expiration of the agreement in 2023. The loss would be only partially compensated by disbursements from a Compact Trust Fund (CTF) set up for this purpose. The country’s current account is expected to remain positive by 6% in 2022, marking a significant contraction from the 2020 level of 13.4% (Asian Development Bank). Inflation stood at 0.6% in 2021 and is projected to gradually increase to 1.6% this year and 2% in 2023 (IMF). The government is attempting to develop the country's marine resources (fishing and aquaculture) as well as tourism and agriculture. However, the tourism sector is hard to develop due to the high cost of access to the islands. Lastly, the services and banking sectors are relatively well developed and represents about half of the country's real GDP, while industry contributes around 12.8%. The Marshallese government made cryptocurrency legal tender in May 2018 alongside the U.S. dollar: with this new currency, called sovereign or SOV, the Marshall Islands became the first country in the world to fully embrace digital economy.

The government of the archipelago does not provide official figures on unemployment, which is estimated to affect 6.4% of the population and 26% of the youth according to the World Bank’s latest figures from 2019. The Marshall Islands are classified as an upper-middle-income country by the World Bank, although the GDP per capita (PPP) was estimated at only USD 3,767 as of 2021.

Monetary Indicators	2016	2017	2018	2019	2020
American Dollar (USD) - Average Annual Exchange Rate For 1 GHS	0.25	0.23	0.22	0.19	0.18

Source: World Bank - Latest available data.

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Latest Update: February 2023