IMF Wraps Up 2025 Article IV Talks With Tuvalu

• Tuvalu's economic recovery is expected to continue, with GDP growth projected at 3 percent in 2025 and 2.6 percent in 2026, supported by externally-financed infrastructure projects and public spending.
• The economy continues to face significant structural challenges and downside risks, reflecting its economic and environmental fragility and heightened global uncertainty.
• Policies should focus on maintaining economic and financial stability, building resilience against shocks, and addressing structural challenges for sustainable growth.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Tuvalu on September 3^rd, 2025. ^[1]

Tuvalu's economy is recovering from the COVID-19 pandemic. Following a sharp contraction during 2020-22, real GDP grew by 4 percent in 2023 and 3.1 percent in 2024, driven by continued effects of reopening on domestic activities and major infrastructure projects including coastal adaptation, maritime transportation, and renewable energy. Both fiscal and external balances remain volatile reflecting Tuvalu's heavy reliance on fishing license fees and grants. Inflation has eased significantly from its pandemic peak of 14 percent in 2022Q3 to 1.2 percent in 2024, in line with global commodity prices and easing of shipping bottlenecks.

The economic recovery is expected to continue, but growth is projected to moderate gradually over the medium term. The economy is projected to grow by 3 percent and 2.6 percent in 2025 and 2026, respectively, supported by the construction of the new phase of Tuvalu Coastal Adaptation Project and an increase in public investment. Over the medium term, growth is projected to moderate gradually to below 2 percent, reflecting sluggish productivity growth, increasing emigration, and vulnerability to climate events. Despite the limited direct impact of recent trade tensions, downside risks to the economic outlook stemming from heightened global uncertainty have increased.

Executive Board Assessment 2

Executive Directors welcomed Tuvalu's ongoing recovery from the COVID‑19 pandemic. Directors noted, however, that Tuvalu continues to face increased downside risks and significant structural challenges stemming from its remoteness, high dependence on external revenue and grants, rising emigration, and vulnerability to climate change. They emphasized the need to enhance fiscal sustainability and implement reforms to address bottlenecks, strengthen resilience, and boost growth potential. Capacity development and close engagement with the Fund and development partners remain essential.

Directors highlighted the need for a multi‑pronged fiscal strategy to reduce the deficit and ensure adequate buffers, while addressing development priorities. Noting Tuvalu's high spending pressures and volatile fiscal revenue, Directors underscored the need to mobilize revenues, rationalize expenditure, and reprioritize resources. They also encouraged the authorities to further improve public financial management to reduce volatility and risks related to the fiscal accounts.

Directors emphasized the importance of establishing an effective regulatory and supervisory framework and enhancing financial inclusion. They welcomed the authorities' efforts to improve Tuvalu's connectivity to the global payment system, including by joining the Asia Pacific Group on Money Laundering and modernizing financial services. Measures to further strengthen the AML/CFT framework and safeguard correspondent banking relationships are important. While noting that the financial sector remains sound, Directors encouraged efforts to enforce reporting requirements, consolidate prudential standards, and enhance risk monitoring.

Directors stressed that prioritized structural reforms are necessary to enhance growth potential and address climate challenges. Noting Tuvalu's limited resources and capacity, Directors agreed on the importance of focusing on developing reclaimed land, enhancing the efficiency of public services, and strengthening state‑owned enterprise governance and performance. Measures to improve infrastructure and steps to explore economic diversification are also important. Directors agreed that enhancing human capital and facilitating female labor force participation would help to mitigate the impact of emigration. They also underscored the criticality of enhancing Tuvalu's resilience to climate change and strengthening disaster preparedness.

^[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2 At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .