Vanuatu Business Review » Current Business Outlookand the impacts of COVID 19


Current Business Outlook
and the impacts of COVID 19

The Vanuatu Chamber of Commerce and Industry (VCCI) has published a research report on the impacts of
COVID-19 on business. This research report was a follow up on the one that was conducted in 2020 and
was conducted through a series of qualitative interviews with a number of businesses throughout Vanuatu. A
cross section of 103 businesses from fifteen subsectors of the economy under the Agriculture, Industry and
Services sectors were analyzed. It comprised of small enterprises to large employers with more than 125
staff.
The Vanuatu Government is well aware of the contraction of the economy during the pandemic. The Economic data that has come out

from the half yearly Economic and Fiscal reports suggests that whilst there is real economic pain, it has been
able to get through these troubling times less affected than other countries in the Pacific. This has largely been
due to the revenues the country has been able to obtain through the VDSP and VCP programs. These programs
now contribute more to government revenues than VAT and has enabled the Government to implement 2 Economic
Stimulus packages, fast tracked major infrastructure projects whilst at the same time operate surpluses.

The key findings of the report:
The Majority of businesses interviewed reported that turnover remains consistently down.

This is highlighted by the VAT amounts that were reported in the Half Yearly Economic update which showed
that VAT collections for the period of January to June 2021 were 9.5% below 2020 levels and 17% below those of
2019 (pre COVID-19) levels. The fall in VAT collections by the government reflects the downward trend of demand
consumption in the country, despite government support through a second economic stimulus package and higher
remittances from seasonal workers.

There are large increases in the cost and difficulty of doing business

Due to the Global supply chain crisis, the delays in ship arrivals and longer shipping cycles have affected business logistics. Freight costs have increased dramatically which have then been passed on to the landed costs of imported goods. There have been reports of continued intermittent shortages of imported items like flour, onions, basic construction materials, cement and spare parts for motor vehicle. Along with the inflationary effects, these have had a serious impact on how businesses have been able to operate.

Some businesses have absorbed the cost increases while others have tried to pass on the costs. A staple in the construction industry is cement. The increased freight costs

have affected the price of cement which has increased from approximately VT900 per bag to VT1600 per bag. In addition to the price increases, the recent shortage of cement created delays in construction jobs. The Global price of fuel has increased approximately 50% since January which has impacted the price of fuel at the pump with increases of approximately 20%. UNELCO’s base rate has increased by 28% since January and VUI has increased 18%. The price of a batard bread loaf has increased from VT60 to VT70 at some bakeries.
There remains a high risk of imported inflation for the wider economy.



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