On this page:

• Summary
• Economy and GDP
• Development aims
• Trade with Australia

Summary

Vanuatu’s economic development is particularly vulnerable to unpredictable weather events. In 2015, Tropical Cyclone Pam severely damaged 90% of buildings and roads. In 2023, the Post Disaster Needs Assessment estimated the total cost of twin tropical cyclones Judy and Kevin to be AUD648 million (VUV51.2 billion), 46% of GDP, with the price of recovery nearing AUD1.16 billion (VUV91.6 billion), 82% of GDP. As well as general damage and repairs, there are also lasting effects on Vanuatu’s two main industries: agriculture and tourism.

The COVID 19 pandemic saw a substantial reduction in revenue with the economy almost grinding to a halt. To soften the blow, Vanuatu’s government rolled out one of the biggest stimulus packages in the South Pacific. Australia also provided a substantial aid package (Vanuatu COVID 19 development response Plan 2020-2022) to assist Vanuatu during the crisis and has subsequently delivered an additional AUD25 million Economic Support Package in 2023. 

The economic impact of the COVID 19 pandemic has been worsened by additional economic woes. In 2024, Air Vanuatu entered voluntary liquidation impacting tourism revenue. Over time, the airline has suffered from political interference, gross mismanagement, and a revolving door of shareholders resulting from frequent domestic political leadership changes. The domestic component of Air Vanuatu is crucial for social stability and the economy, for example, health officials say they now must now rely on charter services to transport medical supplies and patients. 

Despite these challenges, Vanuatu is making strides in diversifying the economy and creating a political environment conducive to improving transparency and tackling corruption. Vanuatu has a long history of bribery, nepotism, and misappropriation of funds that has permeated all levels of government. While there have been some recent high-profile prosecutions for bribery and corruption, it is yet unclear whether this will translate into long-term change.

Economy and GDP

Facing the inherent economic challenges of a small island nation, Vanuatu’s economy is largely reliant on small scale agriculture, fishing, tourism, and offshore financial services. Agriculture alone provides approximately 20% of the country’s GDP. 80% of the population depend entirely on subsistence farming for their daily sustenance, and those who live in urban areas also rely on local produce markets. Locally owned crops consist mainly of root vegetables such as Taro, Yam, Cassava, and Sweet Potato while commercial farming includes copra, coconut, cocoa, coffee, pepper, and vanilla. Agricultural products made up approximately 80% of all exports in 2022. Refining and packaging these products has been a challenge for expanding Vanuatu’s export market. 

Vanuatu’s top exports (2022) were frozen fish, perfume plants, copra, and molluscs. These were mostly destined for Thailand, Japan, South Korea, and the Philippines. Major imports include refined petroleum, passenger and cargo ships, meat, and delivery trucks deriving from China, Australia, Malaysia, and New Zealand. 

Image: Local market – Wikimedia

Tourism supports over 12,000 local Ni-Vanuatu jobs in accommodation, tour companies, transport, and the food and beverage industry. It also contributes up to 45% of GDP both directly and indirectly. The growth of tourism has driven considerable development across Vanuatu’s islands. Most islands now boast small-scale resorts or guesthouses to serve a steady influx of visitors. In addition, the number of cruise ships bringing day visitors has risen sharply during the last decade. Despite substantial tourist dollars entering the country, much of the sector’s profits tend to be repatriated by overseas owners. Encouraging local ownership and linkages would provide greater benefit to the local population; however, the industry is struggling to make these reforms. 

In 2017, Vanuatu launched a ‘Citizenship by Investment Program’ which allowed foreigners to buy a Vanuatu citizenship. It is the only program of its kind in the Asia Pacific. While it granted these new citizens restricted privileges (such as limited political rights) it also came with the key benefit of visa-free entry to 125 countries, including the United Kingdom (UK) and European Union (EU). Concerned about the robustness of Vanuatu’s vetting process, the UK and EU both suspended visa-free entry for Vanuatu Citizens. As a result, the attractiveness of this ‘citizenship for sale’ program decreased and with it the economic benefit. Receipts were AUD106 million (VUV8.5 billion) in 2022, down 34% from 2021 and 41% from 2020. 

Grants from donors such as Australia, New Zealand, the United States, and China, etc., are also important sources of income and accounted for 20% of the country’s total revenue in 2022. 

Development aims

Vanuatu’s National Sustainable Development Plan (2016-2030) includes three priority sectors; infrastructure, health and education (especially tertiary education). Upgrades to the two major airports – Bauerfield (Port Vila) and Pekoa (Santos) – are priorities in infrastructure, as well upgrading roads with proper drainage and fitting out public buildings with water and electricity. The Ni-Vanuatu government also aims to upgrade Vila Central Hospital and recruit more nurses.

For further information on Vanuatu’s Economy and GDP, see the resources below:

Podcasts

1. EU suspends visa-free travel with Vanuatu – ABC Pacific

Articles and fact sheets

1. Rebuilding Public Infrastructure After Tropical Cycle Pam (redr.org.au)
2. Vanuatu 2030-EN-FINAL.pdf (gov.vu)
3. Vanuatu (spc.int)
4. Air Vanuatu enters voluntary liquidation, leaving passengers stranded in Australia and Vanuatu – ABC News
5. Withdraw visa free travel from Vanuatu (europa.eu)
6. Citizenship for sale: fugitives, politicians and disgraced businesspeople buying Vanuatu passports | Vanuatu | The Guardian
7. PSDI-TourismSnapshot-VAN2.pdf (pacificpsdi.org)
8. Vanuatu: Council partially suspends visa waiver agreement due to risks posed by golden passport schemes – Consilium (europa.eu)
9. How Vanuatu’s COVID-19 policies can catapult economic recovery through the private sector in 2022 - Devpolicy Blog from the Development Policy Centre
10. Demanding the Future: Navigating the Pacific's Youth Bulge (lowyinstitute.org)

Trade with Australia

Australia and Vanuatu are close partners, with Australia being the largest provider of development and humanitarian assistance. In 2023 Australia opened an Immigration office in Port Vila to reduce processing times for Vanuatu travellers and increase the flow of people, business, and ideas between both countries. The Vanuatu Consulate-General in Sydney which opened in 2024 will also elevate the bilateral relationship by creating new economic opportunities.

The Pacific Engagement Visa (PEV), Australia’s federal government-assisted permanent residency program, will help to develop person to person links. Vanuatu has been allocated 150 visas annually and PEV holders will have access to Australian employment, schools, tertiary institutions, and the healthcare system.

Vanuatu currently has the largest cohort of workers engaged in seasonal work in rural and regional Australia, with over 11,000 Ni-Vanuatu workers participating in the Australia Labour Mobility (PALM) scheme. These workers send remittances to their families and return home with new skills. Vanuatu is undertaking a review of its participation in the scheme and is expected to announce the outcome in 2024. This follows Tonga and Samoa who undertook similar reviews. While Vanuatu has expressed concern about ‘brain drain’ this has not yet translated in a reduction of participants in either Australia or New Zealand.

The Pacific Agreement Closer Economic Relations PACER Plus program affords Australian investors more opportunities in Vanuatu. ANZ Bank is the highest-profile Australian-branded business in Vanuatu, but only has one branch in Port Vila.

For further information on Vanuatu’s trade with Australia, see the resources below:

Articles

1. 240327 Joint Media Rease – Vanuatu and Australia committed to growing partnership.pdf (embassy.gov.au)
2. 240325 Joint Media Release – Vanuatu opens Consulate-General in Sydney.pdf (embassy.gov.au)
3. First ni-Vanuatu PALM scheme aged-care workers graduate in Port Macquarie (ABC News)
4. Pacific labour mobility over the last year: continued growth (DevPolicy Blog)
5. Brain drain 1: a growing concern – Devpolicy Blog from the Development Policy Centre
6. Brain drain 2: general solutions – Devpolicy Blog from the Development Policy Centre
7. Brain drain 3: specific problems and solutions – Devpolicy Blog from the Development Policy Centre
8. Pacific seasonal workers: not the new blackbirds – Devpolicy Blog from the Development Policy Centre