ECONOMIC OVERVIEW

New Caledonia controls about a quarter of the world’s nickel deposits. Nickel prices have fallen dramatically over the past few years and this has had a major effect on exports and government revenue. The fall in exports has resulted in the Government of New Caledonia encouraging diversification of potential exports.

Paris provides annual subsidies worth €1.3bn into the New Caledonia economy.  Most of it covers expenditure on education, health and other public service salaries, social security contributions and pensions. The remainder goes to targeted development projects, particularly in the Northern and Islands Provinces.

Source: Australian Government, Department of Foreign Affairs and Trade

As of December 31st 2018, 60.235 companies were registered in New Caledonia:

• 70% carry out a service activity: trade, transport, real estate, education, health, etc.

• 18% are concentrated in the secondary sector: industry and construction.

• 12% is represented by primary activities: agriculture.

Three-quarters of businesses are located in the South province, just under a fifth in the North province, and 7% in the Islands province.

Source IEOM

To begin with

A FEW CONTEXTUAL GRAPHS

To continue with

Slight improvement against a background of weaknesses and uncertainties. Resilience.

The business climate of the Caledonian economy throughout 2019 :

• gradually improved by +11.7 pts

• erased the dropout recorded in the 3rd quarter of 2018

Government Revenues stabilized despite the introduction of a new tax.

In 2019, public revenue stabilised at 180.6 billion XPF (net recoveries) against 181.3 billion in 2018. The TGC, a new indirect tax replacing five other taxes and implemented in October 2018, contributed 41.7 billion XPF.

Imports of capital goods rose 40,4% in value driven by exceptional investments in:

• the transportation sector, with the reception of buses for the establishment of the Tanéo and Néobus transport networks; of planes to renew the Aircalin (national airline) fleet.

• the fishing sector with new longliners.

The production of investment credits amounted to 58 billion XPF in 2019, a high level despite a slight slowdown.

Mining, is a good omen for a sector undergoing restructuring as:

• nickel inventories are at their lowest since 201

• bright outlook for demand, notably from China

• rise in nickel prices, +6,0% on average over the year, with a peak at highest for 5 years

However, although the valuation of mineral exports reached a record of +8.9%, with an exported share of growing production, it is part of part of an unprecedented drop in both mineral and metal production.

So given the drop in exports of metal (-19.6% in volume), the overall export performance of the nickel sector is negative in 2019, which widens the trade deficit and is accompanied by a fall in the coverage rate.

TRADE

Increase in trade deficit and fall in coverage rate in 2019

EXPORTS

After having a record year in 2018, exports remain at a high level, 180 billion XPF, but decrease by 8.8%.

The two main exports are:

• Nickel: New Caledonia is the 5th largest producer of nickel ore in the world, 95% of the exports depend on the commodity and on the metallurgical industry.

  The record for mineral exports at 167,9 billion XPF is linked to the rise in nickel prices over the year and to an increasing share of the production of nickel ore intended for export. However it is not enough to compensate for the drop in metal exports (-16 billion XPF or -11.1% in value), following the drop in production.

• Seafood: sales are on the rise with shrimp exports representing ⅔ of of the total seafood exports, are up 7.6% in value and 6.1% in volume.

The main export partners are:

• China

• South Korea

• Japan

• EU

• Taiwan

• USA

• France

IMPORTS

In New Caledonia trade regulation controls the import of certain products in order to promote the flow of locally manufactured products and to protect the local economy.

There are also measures of specific tax exemptions for each business.

The territory is largely dependent on imports for food, consumption (home appliances, Hi-Fi, TV) or transport (cars).

Imports are growing rapidly (+ 8.9% over the year), in the wake of investment (driven by transport, an intensive import sector) and the rebuilding of stocks.

The main import partners are:

• France,

• the European Union,

• Singapore,

• Australia,

• China

• USA

• New Zealand

• Japan

Sources: SMSP, IEOM, ISEE

Regional Trading: 

In 2018, trade between New Caledonia and Oceania represented:

• 3.3% of the total exported, 6.6 billion XPF

• 13.9% of the total imported, 40.7 billion XPF

Australia accounts approximately 70% of the total in both import and exports, followed by New Zealand.  

As a consequence of these developments, the coverage rate average of the year fell by 13 points to 56.9%. The trade deficit widens in 2019, falling below the barrier of 130 billion XPF.

And to finish, a quick look at

2020 ECONOMiC “forecast”

Effects of the COVID-19 Pandemic in New Caledonia

The Global Pandemic COVID-19 make predictions difficult for 2020. The country was confined from March 23rd until April 20th.

Preserved by its isolation in the middle of the Pacific Ocean 17,000 kilometers from France and by a rapid reaction from the authorities, New Caledonia only recorded 20 cases of Covid-19, of which 18 are now cured.

The measures have allowed the resumption of all economic activity, but also a return to “normal life” which means the economic activity is degraded but not as much as in other countries.

Source: www.lemonde.fr/coronavirus-la-nouvelle-caledonie-se-deconfine

Economic numbers 2020

• 3.6 points, approximative loss of GDP growth for 2020 due to Covid-19.

• Losses are estimated in the high end at 41.9 billion Pacific francs, or 351 million euros. 

According to a report from Cerom (Rapid Economic Accounts for Overseas) and entitled the economic impacts of Covid-19 in New Caledonia.

Source: www.20minutes.fr/societe

Government plan to save the economy

• The State Solidarity Fund, [over 5000 applications have been filled] and cash loans granted by the banks to businesses.

• Direct economic aid for the treasury and the maintenance of employment allocated by the provinces.

• Implementation of the partial unemployment system, which is the same as the one of mainland France [84% of net wages, 70% of gross]. This was made possible with the help of the french State through a 240 million euros loan. Today, 15,200 people out of 66,000 working people are part-time unemployed on the Caillou.

Source: www.20minutes.fr/societe

Future expectations, A new model of society

The government and provinces are working on a new model of society in order to come back even stronger from the health crisis. Some of their proposed changes are the following:

• Less administrative constraints.

• Use of digitalisation.

• Improvement of wages.

• A more sustainable mining sector (through the selling of a cleaner nickel).

Source: www.20minutes.fr/societe