Summary:Palau is a middle-income micro state in the Pacific (population: 18,000) that relies
heavily on tourism and grants, and is exposed to natural disasters. The economy grew
strongly at 9.4 percent in FY2015 led by robust tourism and construction activity, but the
surge in tourist arrivals strained infrastructure and was tilted to low budget tourism. The
fiscal position has improved, but further efforts are needed to ensure long-term fiscal
sustainability. The outlook is favorable although subject to significant downside risks. The
discussions focused on
