Marshall Islands economy: Not a very bright future.

The Republic of Marshall Islands, though an independent state, is so dependent on U.S. aid that its economy would not count or much without such aid.

Subsistence agriculture, small scale industry restricted to a few products, and a budding tourist industry make up for the major part of the nation’s economic activities, as well as its GDP. The major agricultural produce of the Islands are coconuts, breadfruit, tomatoes, melons, etc. Industries include processing of copra and tuna, and handicrafts production.

There are many aquaculture farms on the Islands where giant clams and sea cucumbers are farmed. Tourism is picking up, and is seen as an important part of the economy for the future. Snorkeling and scuba diving are popular activities that tourists come looking for. Especially the presence of World War II wrecks in the waters off Marshall Islands draw hordes of tourists, mainly from the U.S.

The Government is making efforts to capitalize on these limited attractions and facilities to make the most of it. The Marshall Islands are facing the typical problems of small, isolated Islands that do not have rich resources and are far away from major markets. Further, they are forced to import much more than they have the capacity to export. The rising sea level on account of global warming is threatening their very existence.

According to a report published by the Asian Development Bank, the Marshall Islands would record a low growth rate for 2009, at only 0.5%, while inflation is expected to come down to 9% from a high of 29.4% in 2008. Public debt of the Islands is said to be very high. The United States is the major benefactor of the Islands, though Japan, of late, has contributed substantial sums of money for the Islands development.

The U.S. and the Marshall Islands have a Compact of Free Association, under which the U.S. and the Islands make contributions that will be used in future, to set up a Trust in 2023, that would pay out annuities in perpetuity to Marshall Islands. But otherwise, the future does not appear to be too bright for the Marshall Islands.