Tahiti, July 16, 2024 – A very favorable domestic consumption and unprecedented figures in the tourism industry have led to a record gross domestic product (GDP) for French Polynesia, reaching 706 billion francs in 2023.
This is a record level never before achieved in French Polynesia. According to the estimation by the overseas economic accounts group (Cérom), the GDP of the territory reached 706 billion francs in 2023, an increase of 7% in value compared to the previous year – 3 points of volume growth and nearly 4 points of price increase – amounting to 45 billion francs more than in 2022. This record GDP is almost 10% higher than the territory’s GDP before the health crisis, announced the representatives for Polynesia of Cérom (ISPF, AFD, IEOM) on Tuesday morning.
Household Consumption: 482 Billion
This growth in 2023 is driven by two-thirds by domestic demand, notably household consumption (482 billion, +5.5% in value) and private investment (116 billion, +9.4% in value), while the public sector shows a slight increase in operating expenses (211 billion, +2.9% in value) and a decline of -1% in public investment over the year (33.6 billion), returning to the 2019 level.
With the improvement in the tourism sector, export growth in 2023 outpaced import growth, with a positive effect of 0.9 points on growth. The increase in exports of goods and services (+17%) is mainly linked to record tourism figures. In 2023, Polynesia welcomed 261,813 visitors, generating an estimated 100 billion francs for the transport and hospitality sectors. This is complemented by strong results in pearl farming exports, which more than doubled in 2023 to reach 17 billion francs. At the same time, the 2.5% increase in imports of goods and services negatively impacts growth.
Business investment rose by 27% in 2023, primarily for the acquisition of capital goods. However, this result struggles to boost total investment (+6.9%), contributing 0.9 points to GDP growth. Investment is hampered in 2023 by stable activity in the construction sector and a contraction in household investment (-5%), due to the continued rise in real estate investment costs and increasing mortgage interest rates.
Virtuous Effect on Employment
This record growth observed in 2023, along with the accompanying wealth production, has had a virtuous effect on the labor market. The wage bill increased by 7%, with an average hourly wage increase of 3.9%. Market employment improved by +4.2% over the year, with 2,500 additional full-time equivalent (FTE) positions, mainly in the sectors of commerce, construction, hospitality, and business support activities. Over the year, the employment rate rose by 1.2 points to 55.8% of the working-age population, while the proportion of “fragile” jobs (short-term contracts, interns, non-salaried workers) decreased by 1.5 points to 13.5%, the lowest in five years.
Combined with a less tense inflationary environment (+3.3% in 2023 compared to +6.4% in 2022) and improved mixed income for individual businesses, this improvement in the labor market translates into a significant increase in household disposable income, which grew by 6% in value.
“Weak Signals” for 2024
After such a successful year, there are questions about the ability of Polynesia’s economy to stabilize such a high growth rate. “We are seeing a positive set of indicators for the first few months of 2024,” said Fabrice Dufresne, director of the IEOM Papeete office. “We have a business climate indicator around 107 points, well above its long-term average, reflecting a positive outlook from business leaders. Inflationary pressures have significantly eased, with inflation at +0.7% in May. We also closely monitor the business failure indicator, which is very favorable: business failures are down by 30% – around 130 in the first quarter of 2024 – while there is a strong recovery in the overseas territories and mainland France.” However, the IEOM director noted a “weak signal” in employment in the construction sector, which is dragging down early 2024 figures, although “in April, market employment was still growing at 3% year-on-year,” he noted.
Regarding credit production, there is a “slowdown” in 2024: “We had a record production of 200 billion francs in 2023, historically the highest. Between January and May 2024, we observe a decline of about 20%, primarily from businesses, but also in real estate loans to individuals, while consumer credit production continues to rise. This decline is due to the continued increase in real estate project costs and rising interest rates until June 2024, related to the increase in key rates until October 2023. Since June 2024, the IEOM has initiated the first cut in key rates. We have not yet seen the effects of this cut. Overall, based on early 2024 indicators, we are still looking at a favorable year.”