Vanuatu’s investment outlook following the earthquake must be understood within the broader economic context facing Small Island Developing States (SIDS). This context is outlined in the World Economic Situation and Prospects 2026 report, produced by the United Nations Department of Economic and Social Affairs (UN DESA) in partnership with the United Nations Conference on Trade and Development (UNCTAD) and the five United Nations regional commissions, the Economic Commission for Africa (ECA), the Economic Commission for Europe (UNECE), the Economic Commission for Latin America and the Caribbean (ECLAC), the Economic and Social Commission for Asia and the Pacific (ESCAP), and the Economic and Social Commission for Western Asia (ESCWA).

The report projects that economic growth in SIDS will slow from an estimated 3.5 per cent in 2025 to 2.8 per cent in both 2026 and 2027, reflecting persistent structural vulnerabilities. Although SIDS are benefiting from an ongoing recovery in tourism, they remain highly exposed to climate shocks, limited economic diversification, elevated debt burdens, and persistent investment gaps. These factors continue to constrain their ability to finance development and recovery independently.

As reflected in recent quarterly data (World Economic Situation and Prospects 2026), global trade in services has continued to expand, although growth rates have fluctuated across categories. While some quarters recorded year-on-year growth closer to 8–10 per cent, overall real growth for 2025 is estimated at approximately 5.3 per cent, with a projected moderation to around 5 per cent in 2026. Despite continued expansion, developed economies still account for roughly 70 per cent of global services export revenues.

At the same time, many developing and low-income countries face limited fiscal space, rising debt vulnerabilities, and declining development assistance. This further restricts essential public spending and reduces government’s capacity to fund infrastructure, social services, and disaster recovery programmes. Global investment also remained low in 2025, with foreign direct investment flows slow worldwide, increasing competition among developing countries for limited capital.

Compounding these challenges, climate-related extreme events are becoming more frequent and severe, disrupting agricultural production, raising food prices, and placing additional pressure on public finances through disaster response and reconstruction costs. These conditions are directly relevant to Vanuatu’s post-earthquake recovery, underscoring the need for resilient, well-targeted, and climate-informed investment strategies to support sustainable recovery and long-term development.

Foreign Investment Trends in 2025: From Recovery to Stabilization

Against this global and regional backdrop, Vanuatu’s foreign investment performance in 2025 reflects a clear three-phase transition from early recovery to accelerated growth and then to stabilization.

In the first quarter of 2025, VFIPA approved 49 new foreign investment applications, concentrated mainly in wholesale and retail trade (16 approvals), construction (10), and tourism-related activities (8). This pattern reflected the initial post-earthquake and post-pandemic recovery phase, driven largely by rebuilding activity, the return of visitor demand, and the restoration of commercial services. Investment in Q1 was highly geographically concentrated, with 94 per cent of approvals located in Shefa Province and only 6 per cent in Sanma, highlighting both the central role of Port Vila in economic recovery and the persistence of regional disparities.

Momentum strengthened significantly in the second quarter of 2025, with foreign investment registrations increasing to 76, representing a 55 per cent increase over Q1. This surge reflected rising investor confidence, improved market sentiment, and the impact of clearer policy signals and infrastructure rehabilitation. The composition of investment also improved, with 65.8 per cent of registrations from new foreign investors, 18.4 per cent from expansions, and 15.8 per cent from joint ventures.

By sector, Q2 saw continued strength in tourism, wholesale and retail trade, professional and technical services, construction, and manufacturing. Manufacturing approvals increased from one in Q1 to nine in Q2, suggesting early progress toward value-adding activity and reduced import dependence. Professional and technical services rose to 11 approvals, reflecting growing demand for engineering, planning, compliance, and advisory capacity during the recovery phase. Geographically, investment began to spread beyond Shefa, with Sanma’s share rising to 15 per cent and Tafea recording its first approval.

In the third quarter of 2025, investment activity moderated to 50 new registrations, indicating a transition from the exceptional growth of Q2 toward a more stable and sustainable investment trajectory rather than a decline in investor interest. Approximately 84 per cent of Q3 approvals came from new foreign investors and 14 per cent from joint ventures, confirming continued international interest despite a cautious global climate. Sectoral patterns remained consistent, with tourism, retail, professional services, construction, and manufacturing continuing to dominate. Manufacturing maintained moderate momentum, while construction remained linked to ongoing rebuilding. Geographically, Shefa continued to dominate, though Sanma’s sustained participation indicates gradual potential for regional diversification.

As illustrated in the quarterly trend chart, foreign investment approvals increased from 49 in Q1 to a peak of 76 in Q2, before moderating to 50 in Q3. Taken together, this pattern reflects a transition from recovery-driven activity in the first quarter, to confidence-led acceleration in the second, and subsequently to stabilization at a higher baseline level in the third quarter. Importantly, tourism continued to dominate investment approvals across all three quarters, underscoring its central role in Vanuatu’s economic recovery and investor confidence. Rather than indicating a decline, the Q3 moderation suggests that Vanuatu’s post-earthquake investment environment is moving beyond short-term reconstruction and toward a more balanced and sustainable growth path.

Infrastructure, Urban Reform and Investment Enablers

The Government has demolished 21 buildings in downtown Port Vila as part of its urban restructuring programme, creating space for safer, more resilient, and better-planned commercial development. These works form part of a broader strategy to improve accessibility, safety, land use efficiency, and business functionality.

In parallel, the Government is promoting new townships to reduce pressure on Port Vila and support balanced regional development. The National Housing Policy and the revised 2025 National Building Code provide updated standards for safer, more affordable, and climate-resilient construction. Major road rehabilitation works in Santo and Port Vila are also improving connectivity between production areas, ports, airports, and markets, reducing transport costs, and improving business efficiency.

Alignment with VFIPA’s Investment Promotion Strategy 2026–2030

These developments align closely with VFIPA’s Investment Promotion Strategy (IPS) 2026–2030, which prioritizes sustainable foreign investment across key sectors, including tourism, manufacturing, renewable energy, fintech, fisheries and agriculture. For the rollout of IPS 2026–2030 this year, tourism will be VFIPA’s priority sector, reflecting its critical role in economic recovery and growth. The Strategy emphasizes regulatory reform, infrastructure development, investor facilitation, and stronger inter-agency coordination to ensure that reconstruction and development efforts support long-term diversification, resilience, and competitiveness.

In this way, IPS 2026–2030 links post-disaster recovery with broader development objectives, ensuring rebuilding efforts strengthen investor confidence, expand private sector participation, promote regional inclusion, and enhance resilience to future shocks. Taken together, the Government’s infrastructure and regulatory reforms, along with VFIPA’s targeted investment promotion agenda, form a coherent platform supporting Vanuatu’s transition from post-earthquake recovery toward sustainable, resilient, and inclusive economic growth.