Policy options for small PICs in the event of global economic crisis

As the recent financial crisis wrecked havoc on the global economy, Pacific Island countries (PICs) hoped that their oceanic remoteness would spare them of the worst economic calamities. An uncertain faith prevailed amongst the Pacific Island economists and policymakers. Some argued that the PICs would be cushioned from the global crisis due to their isolation from the global financial system. These assumptions proved to be far from the truth. In this age of global trade, information and financial mobility, no country is an island, regardless of size or geographical location. The global economy affected just about every country in the Pacific region in one way or another. How and why a global crisis that began far away in the United States reached the door steps of impoverished PICs is examined in this paper. The analysis focuses on the linkages that exist between the global economy and the small Pacific Island economies. Anecdotal narrative and comparative analysis of Fiji, Samoa, Solomon Islands, Vanuatu and Kiribati is done here to explain these linkages. The PIC policymakers need to understand the significance of these linkages to implement corrective policy measures to mitigate the effects of global downturns.