By Ofani Eremae
After three difficult years, the Solomon Islands’ economy is growing again.
That’s according to Dr Lodewijk Smets, a senior economist at the World Bank office in Honiara.
His comments came as the World Bank released its latest report on the economies of 11 Pacific island countries on Tuesday, August 8, 2023.
“The Solomon Islands economy is growing again after three difficult years,” Smets told reporters, citing the report Pacific Economic Update: Recovering in the Midst of Uncertainty.
“It’s growing at an estimated 2.5 percent,” he added.
Smets cited COVID-19, the closure of international borders, and the 2021 Honiara riots as factors that contributed to the difficult economic times for the country.
“But now there’s positive growth again.
“And the main drivers are the construction of the Pacific Games facilities, the mining sector, which is reviving again, remittances from Solomon Islanders working overseas and other infrastructure developments such as Tina Hydro, airport construction, and roads.”
According to Pacific Economic Update: Recovering in the Midst of Uncertainty, Pacific growth is expected to pick up to 3.9 percent this year from 2 percent in 2022 and then moderate to 3.3 percent next year.
Fiji is expected to continue leading the Pacific’s recovery from the pandemic, starting with a strong rebound in 2022 (18.6 percent) and into 2023 (7.7 percent), owing to a revival of tourism.
Robust growth is also projected for Palau (10.3 percent), Samoa (5.5 percent), Tuvalu (3.9 percent), and the Federated States of Micronesia (3.2 percent).
But while the report projects growth for the Pacific, it also warns of risks.
“Uncertainty about global commodity price movements, geopolitical tensions, slower growth among major trading partners, and the region’s vulnerability to natural disasters pose downside risks to the Pacific economic recovery,” it said.
“Many Pacific countries rely heavily on energy and food imports, and persistently elevated international food and energy prices will create prolonged price pressures on the region, with the potential to push vulnerable populations into poverty,” the report added.
Late last month, Permanent Secretary of the Ministry of Finance McKinnie Dentana told reporters that despite the projected economic growth this year, which he puts at 2.7%, fiscal challenges remain evident in the short to medium term.
“Government overall performance over the first six months of this year is below monthly projections by $97 million, with total revenue collection at 46% and total expenditure at 37%,” Dentana said.
He also confirmed that revenue collection for the first and second quarters of this year has been slow while expenditures have increased.
This, he said, has put the Government in a “tight” cash flow situation.
Dentana said that as a result, the Government has put in place a number of measures to manage the cash flow situation.
These include:
- Expanding domestic borrowing instruments and threshold
- Strengthening revenue collections
- Restricting duty exemptions on discretionary items such as vehicles and machinery.
- Restricting overseas and domestic travels, as well as payment of special imprests.
