Marshall Islands Economy Facts
The Marshall Islands economy consists of a traditional part, mainly based on cultivation, fishing and animal husbandry for self-catering, and a modern service sector which is found in the metro areas of Majuro and Ebeye. The modern sector is largely kept up to date through aid, mainly from the United States.
The aid accounts for more than half of the state’s revenue. Under the Compact of Free Association agreement (see Foreign Policy and Defense) with the United States, the Marshall Islands are guaranteed financial support from the United States of approximately $ 30 million annually until 2024, as well as $ 7 million in annual contributions to a kind of future fund for use after the US the support ceased.
- Countryaah.com: Major imports by Marshall Islands, covering a full list of top products imported by the country and trade value for each product category.
The public sector is large. Before the renegotiation of the agreement on free association in the early 2000s, which meant lower levels of subsidy, the government reduced the number of government employees and liberalized the economy. For example, import duties were sharply lowered.
The services sector contributes to almost three quarters of the country’s gross domestic product (GDP). The tourism industry gained importance during the 1990s and is now the country’s most important source of foreign currency. Investments are being made in developing tourism, in cooperation with Taiwan, which is the country’s second largest donor after the US. Taiwan promised major investments in 2004 and more than $ 40 million in aid over a 20-year period.
During the 1990s, the Marshall Islands also invested in developing financial services and attracting banks and insurance companies through favorable tax and confidentiality rules. Banking supervision was tightened in the early 2000s after the industrialized countries’ cooperative organization OECD accused the country of allowing so-called money laundering, that is, through various transactions to transform illegal income into legal. But when the EU published its first “black list” of tax havens in December 2017, the Marshall Islands was one of 17 designated countries and territories.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including MHL which represents the country of Marshall Islands. Check findjobdescriptions to learn more about Marshall Islands.
Fishing is an important industry and includes a tuna industry. Fish accounts for the majority of exports. Sales of fishing licenses to foreign fishing fleets also generate good income. In 2015, license sales accounted for almost one-third of total revenues to the Treasury, unless aid is included. However, the following year, revenues from license fishing were estimated to decrease, as the agreement with the US fishing fleet was renegotiated with lower catch quotas as a result.
In the late 1990s and early 2000s, the country’s GDP fell several years in a row. The reasons were, among other things, the cuts in state administration, reduced aid from the US, drought and the financial crisis in Asia 1998-1999. Only in 2004, when money from the new agreement with the United States began to flow in, did the economy grow again. A contributing reason was that the agreement with the US gave room for investment in infrastructure and building projects, which were carried out by private companies.
In the first half of the 2010 GDP grew by an average of a few percent per year, but growth varied considerably from year to year. While in 2010 exceeded 6 per cent, growth in 2014 was at a minus. The fluctuations are largely due to the amount of government investments made in infrastructure and other construction projects. The external debt in 2016 was $ 91 million, a slight increase from the previous year. Annual inflation fell from just over 6 percent in 2011 to a moderate 0.7 percent in 2016.
The Marshall Islands have a large trade deficit with foreign countries. Fish, especially tuna, is by far the most important export product, followed by coconut products such as copra (dried coconut meat) and coconut oil. Imports consist of everything from food and fuel to machinery and transport equipment. The largest exporting country is the United States, while imports are mainly from the USA, Japan and Australia.
The Marshall Islands are fighting several obstacles to continued economic development. The country is small with a limited home market. It is remote, which leads to high transport costs. It is also sometimes exposed to natural disasters such as droughts and tropical storms. Another problem is major deficiencies in the infrastructure of many of the islands. In addition, the state companies, such as the airline Air Marshall Islands, usually suffer losses that drain the Treasury.
FACTS – FINANCE
GDP per person
US $ 3,621 (2018)
US $ 212 million (2018)
2.5 percent (2018)
Agriculture’s share of GDP
16.8 percent (2017)
Manufacturing industry’s share of GDP
1.8 percent (2017)
The service sector’s share of GDP
70.2 percent (2017)
0.6 percent (2019)
Government debt’s share of GDP
25.2 percent (2018)
US $ 38 million (2016)
US $ 104 million (2016)
– US $ 16 million (2016)
Commodity trade’s share of GDP
67 percent (2018)
Main export goods
fish, coconut oil, copra (dried coconut meat)
Largest trading partner
USA, Japan, Australia