Economy
GDP: $109.5 million.
GDP per capita: $5,482.
National income (GDP + foreign assistance): $143 million.
National income per capita: $7,475.
GDP composition by sector: Public Administration 29%, Trade 24%, Construction 12%, Hotels/Restaurants 6%
Industry: Types--Government, tourism.
Trade: Exports ($9 million)--fish, garments, handicraft. Export markets--U.S., Japan, Taiwan. Imports ($86 million)--fuel, food and beverages, manufactured goods. Import sources--U.S. + Guam (48%), Japan, Singapore, Taiwan, Korea.
External debt: $20 million.
Currency: U.S. dollar.

Economy of Palau
Palau's per capita GDP of $5482 makes it one of the wealthier Pacific Island states. Nominal GDP increased by an annual average of nearly 14% from 1983 to 1990, and by an annual rate of over 10% from 1991 to 1997. Growth turned sharply negative in 1998 and 1999 as a result of the Asian financial crisis, but grew by 3.3% and 3.1% in 2000 and 2001 respectively.

Tourism is Palau's main industry. Activity focuses on scubadiving and snorkeling among the islands' rich marine environment, including the Floating Garden Islands to the west of Koror. The number of visitors--85% of whom come from Japan, Taiwan, and the U.S.--reached nearly 67,000 in 1997, more than quadruple the level of a decade earlier. Tourism earned $67 million in foreign exchange for Palau in 1996, accounting for roughly half of GDP. Arrivals from Asian countries dropped in 1998 and 1999 due to the regional economic downturn and remained at about 57,000 per year for 2000-2002.

The service sector dominates the Palauan economy, contributing more than 80% of GDP and employing three-quarters of the work force. The government alone employs nearly 26% of workers. One of the government's main responsibilities is administering external assistance. Under the terms of the Compact of Free Association with the United States, Palau will receive more than $450 million in assistance over 15 years and is eligible to participate in more than 40 federal programs. The first grant of $142 million was made in 1994. Further annual payments in lesser amounts will be made through 2009. U.S. grants in 2001 totaled $20 million.

Construction is the most important industrial activity, contributing over 9% of GDP. Several large infrastructure projects, including the rebuilding of the bridge connecting Koror and Babeldaob Islands after its collapse in 1996 and the construction of a highway around the rim of Babeldaob, boosted activity at the end of 1990s.

Agriculture is mainly on a subsistence level, the principal crops being coconuts, root crops, and bananas. Fishing is a potential source of revenue, but the islands' tuna output dropped by over one-third during the 1990s.

The main economic challenge confronting Palau is to ensure the long-term viability of its economy by reducing its reliance on foreign assistance. Palau has created a trust fund to be drawn upon after the cessation of Compact grants, the value of which had grown to $140 million by the beginning of 2000, but has been static in 2001-2002.
source: http://www.state.gov