The International Monetary Fund says a drop in Palau's economic growth this year is in part due to the falling number of visitors.
Visitor numbers fell after China told its tourist agencies to stop flights to Palau over its ties with Taiwan in September last year.
A Palau Pacific Airways plane parked in Hong Kong. Photo: Wikimedia Commons
Reporting after a trip to Palau this month, a IMF team said economic growth declined 3.7 per cent in 2017, led by drops in tourism and construction activity.
The IMF said since then, there had been a gradual pick-up in tourism and an increase in investment from the US.
Since the China ban, Palau has trumpeted a focus on high-value and sustainable tourism.
The IMF said it supported this strategy but a failure to implement it could limit growth opportunities.
It said Palau's economic growth remained volatile because of its strong reliance on tourism.
The fund recommended Palau develop a fiscal framework to manage challenges and risks and promote growth and stability.
