22.05.2026
Marshall Islands’ economy is expected to strengthen in 2026, supported by Compact-related public spending, income-tax relief and continued activity in fisheries and public services. Growth should then moderate in 2027 as the temporary fiscal impulse fades and structural constraints reassert themselves. Inflation is projected to rise in 2026, mainly because of higher imported fuel and freight costs, before easing slightly in 2027. Fiscal policy is supported by renewed Compact funding, but the economy remains highly dependent on grants, fisheries revenue and public-sector activity. The external position is generally strong, but volatile, reflecting grant inflows, imports linked to public investment and one-off capital purchases.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 3.0 | 3.7 | 2.8 |
| Inflation (%, yoy) | 3.7 | 5.7 | 4.7 |
| Employment rate (% of working-age population, 15+) | 38.0 | 38.1 | 38.1 |
| Fiscal balance (% of GDP) | 2.4 | -5.3 | 0.6 |
| Gross public debt (% of GDP) | 23.7 | 21.7 | 20.4 |
| Current account balance (% of GDP) | 16.8 | 16.9 | 12.0 |
Growth is supported by Compact-related spending
Real GDP growth is estimated at around 3.0% in 2025 and is projected to rise to 3.7% in 2026. The near-term acceleration reflects income-tax relief, delayed Compact-related spending from 2025 and a scheduled fiscal expansion in 2026. Public administration, fisheries-related activity and externally financed projects remain the main sources of economic activity.
Growth is expected to moderate to 2.8% in 2027 as the temporary fiscal boost fades. Over the medium term, Marshall Islands’ growth potential remains limited by remoteness, high transport costs, labour emigration, a narrow production base and climate vulnerability. Stronger private-sector development and higher domestic value added from fisheries will be important for raising long-term growth.
Inflation rises due to imported cost pressures
Inflation moderated in 2025 but is expected to rise in 2026 as higher imported fuel, food and freight costs feed into domestic prices. The Marshall Islands is highly import-dependent, so global energy and shipping shocks quickly affect consumer prices.
Inflation is projected to ease in 2027 but remain above its historical average. The main risks come from higher oil prices, shipping disruptions, food-price volatility and supply bottlenecks. Because the country uses the US dollar, monetary-policy flexibility is limited, making fiscal policy and targeted social support more important in responding to price shocks.
Fiscal balance weakens temporarily in 2026
The fiscal balance is estimated to have remained in surplus in 2025, supported by Compact grants, fisheries revenue and contained spending. However, the balance is projected to shift into a deficit in 2026 as the government expands spending and undertakes one-off capital purchases, including aircraft procurement for the national airline.
The fiscal position is expected to improve again in 2027 as temporary spending falls. Public debt is projected to remain moderate and decline gradually, from 23.7% of GDP in 2025 to 20.4% in 2027. However, fiscal risks remain significant because the budget is highly dependent on external grants, fisheries revenue and withdrawals from trust-fund assets.
External position remains strong but volatile
The current account surplus is projected to remain large in 2025–2026, supported by Compact transfers, fishing-license revenue and external grants. However, the surplus is expected to narrow in 2027 as import demand remains high and some one-off external inflows fade.
The external position is strong on paper, but volatile. Capital imports, fuel prices, aircraft purchases, grant timing and fisheries revenue can cause large swings from year to year. The main vulnerabilities are import dependence, climate shocks, limited export diversification and the economy’s reliance on public transfers.
Overall outlook
Marshall Islands’ outlook is stable but highly dependent on external support. Growth should strengthen in 2026 before moderating in 2027, while inflation is expected to rise because of imported cost pressures. Public debt remains moderate, but fiscal sustainability depends on prudent management of Compact resources, fisheries revenue and trust-fund assets. The main medium-term priorities are climate resilience, public financial management, labour-force development, fisheries value capture and private-sector growth.
Sources:
International Monetary Fund, Republic of the Marshall Islands: 2025 Article IV Consultation and Staff Report, December 2025.
International Monetary Fund, World Economic Outlook, April 2026.
Asian Development Bank, Asian Development Outlook, April 2026: Marshall Islands.
World Bank, Pacific Economic Update, May 2026.
World Bank, Marshall Islands Macro Poverty Outlook, April 2026.
