Cook Islands

Key trends and development challenges

Cook Islands is a self-governing territory in free association with New Zealand, located in the Pacific sub-region of Polynesia. In 2022, the GDP of Cook Islands was $256 million, making it one of the smallest economies in the Pacific. The country has a population of 19,200 (2022), resulting in a GDP per capita of $13,300, the second-highest in the Pacific. While its economy is small, Cook Islands has an extensive ocean territory and plentiful marine resources. The country’s Exclusive Economic Zone (EEZ) covers more than 1.96 million square kilometres, the 19th-largest globally, and is comparable in size to the EEZ of India.

In 2020, Cook Islands graduated from the Organisation for Economic Co-operation and Development’s list of official aid recipients. As such, in 2022 it was the lowest per capita aid recipient in the Pacific. Cook Islands is the first Pacific Islands state to graduate from aid since 2000, an indicator of its strong economic performance and sound fiscal management. Despite its classification as a high-income country, Cook Islands still faces significant growth challenges and remains highly exposed to climatic shocks. The country’s highly dispersed population — spread over 15 islands — significantly increases the per capita cost of basic service delivery.

Cook Islands’ economy relies heavily on tourism, with the leisure economy accounting for around 85% of GDP. The Covid-19 pandemic significantly disrupted the country’s economy, as border closures and slow global tourism rebound hampered growth. Encouragingly, 2023 visitor arrival estimates were close to parity with pre-pandemic levels. Among Cook Islands’ key development priorities are the diversification of its economy beyond tourism and the building of climate-adapted public infrastructure.

Over the 2008–22 period, more than 650 aid and development projects were implemented by 24 development partners in Cook Islands. Cumulatively, these projects saw total Official Development Finance (ODF) spending of $516 million in real terms, or about $34 million per year on average. During this period, loans made up 23% of total ODF flows to the country, the fourth-highest share in the Pacific. As a result of its graduation from aid, grant financing to Cook Islands in 2021–22 was 98% lower than the pre-pandemic average. Consequently, the role of aid to the Cook Islands economy is the lowest in the Pacific. ODF makes up just 0.1% of the country’s GDP, a sharp fall from a peak of 16% in 2015.

Development partners and sector trends

The vast majority (85%) of ODF support to Cook Islands since 2008 has come from four development partners: New Zealand (42%), China (22%), the Asian Development Bank (12%), and Australia (9%). Donor concentration in Cook Islands is among the highest in the Pacific.

New Zealand’s aid to Cook Islands has typically focused on education and governance. Conversely, China’s support has focused on infrastructure, in particular the building of government offices, court houses, and sporting facilities. The last major financing package received by Cook Islands was a $20 million loan from the Asian Infrastructure Investment Bank, through its Covid-19 Crisis Recovery Facility. Despite the addition of this loan, the Asian Development Bank continues to rank Cook Islands’ risk of debt distress as low.

ODF to Cook Islands largely conforms with regional trends. The largest sector for incoming ODF is government and civil society, which accounts for 32%, below the regional average of 37%. Development partners have also focused funds on education (14%), water and sanitation (11%), and energy (8%), all of which see allocations above the regional average.

Since 2008, Cook Islands has received $54 million in development financing with a “principal” focus on either climate adaptation or mitigation. Over this period, the country has seen $71 million in development financing with a “significant” focus on climate outcomes. Contrasting with regional trends, Cook Islands saw a sharp increase in climate development finance in the early-2010s, but limited growth over the proceeding decade.

As a share of total ODF received by Cook Islands, “principal” climate projects make up 9% of total spending, in line with the Pacific regional average. Similarly, spending on “significant” climate projects in Cook Islands makes up 15% of incoming funds, slightly above the regional average of 13%. To date, the most significant climate investment in Cook Islands has been the Pacific Renewable Energy Program funded by New Zealand and the Asian Development Bank, a project building renewable energy infrastructure in the country’s remote outer islands.

Between 2008 and 2022, Cook Islands received $3 million in development financing with a “principal” focus on gender equality, and $105 million in development financing with a “significant” focus on gender equality. “Principal” gender equality financing constituted 0.6% of ODF received by the country, below the regional average of 2%. “Significant” marked gender financing made up 22% of incoming ODF, in line with the regional average. The largest project directly targeting gender equality in Cook Islands was the $393,000 Women’s Counselling Centre, built by New Zealand in 2012.