Proposes 6% lower than FY 2016 annual budget

By: L.N. Reklai

February 14, 2017 (Koror, Palau) President Tommy Remengesau Jr. transmitted the FY 2017 national budget bill of $87 million dollars to both houses of congress (OEK) yesterday. The bill proposes a budget that is 6% lower than FY 2016 budget.

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“While the outlook for Palau’s economy over the medium term remains favorable, supply-side constrains on the construction industry and increased price competition for the tourism industry are anticipated to negatively impact our revenues in the short-term,” stated Remengesau in his transmittal letter to Speaker Anastacio of the House of Delegates and Senate President Baules of the Senate.

President stated that the proposed budget is intended to “support ongoing efforts to ensure sufficient cash flow, maintain adequate reserves to meet national emergencies, and strengthen long term fiscal capacity.”

Additionally, the “programmatic funding are reallocated …to ensure that ongoing social programs that support our most vulnerable population are sustained.”

Citing that almost $40 million dollars in public and private sector construction projects are ongoing or will start in 2017, limited supply of construction materials and manpower are expected to delay some of the projects to later part of the year. The expected delay will impact revenue in fiscal year 2017.

According to President Remengesau, despite the increase in room capacity, the 145 rooms from 2016 such Cove Resort, Airai Forest Villa  and the upcoming 82 rooms in 2017 such Palau Central Hotel, MCS Hotel and other smaller accommodations, slow growth in Asian tourism markets, political turmoil in Europe and North American markets, increasing price of fuel and the strong US dollar, will impact Palau’s competitiveness with other destination markets in the region.

In spite of the expected tourism downturn, the Executive branch is positive that increase in overall employment and average wages last year will continue to sustain consumer spending.  Expecting the strong demand for labor in the construction and ICT  sector to expand in the medium term and further stimulate consumer spending.

In his transmittal, President Remengesau added that “continued fiscal discipline and sound structural policies should allow us to continue and even expand current programs and services that support our most vulnerable despite 2017 slower growth scenario.” [/restrict]