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Solomon Islands : GDP growth
Economic performance -------------------- Growth slowed to 5.5% in 2012, from 10.6% in the previous year (Figure 3.34.1) Growth is expected to slow further, to 4%, in 2013. Although agricultural p... roduction and gold output are projected to increase, log production is seen to decline. A scaling up of gold mining is expected as the Gold Ridge mine reaches full production capacity of 95,000 ounces per year, up from 79,400 ounces in 2012. The Regional Assistance Mission to Solomon Islands will start to wind down in 2013 and thereafter focus largely on building the capacity of the Royal Solomon Islands Police Force. The mission’s military component will be withdrawn from mid-2013 as the country transitions from post-conflict and crisis recovery to sustainable development based on the National Development Strategy, 2011–2020. The mission has also been a major development partner, but the effect of withdrawal on the economy will be minimized by transferring its development activities to the programs of other development partners, in particular Australia and New Zealand. In 2014, growth is projected to remain at 4% with continued investment in mining and its spillover effects on the economy. Additional investment in telecommunications is expected to harness opportunities created by the broadband project. Typical price lags in Solomon Islands mean international food price rises from mid-2012 are expected to affect inflation in early 2013 but dissipate by midyear. Over the full year 2013, average inflation is expected to ease to 4.5% as economic growth slows. Similar inflation is expected in 2014, in line with the modest growth forecast for that year. The 2013 budget marks a return to fiscal consolidation with a balanced budget planned. Expenditure growth has been limited to 7% despite a planned increase in public wages. This compares with an average 22% annual increase in expenditure from 2004 to 2011. Revenue growth is estimated at 8% in 2013, creating a small budget surplus of $100,000—effectively a balanced budget. The central bank is expected to continue to soak up excess liquidity through the sale of short-term bills. The exchange rate will continue to be managed against a basket of currencies, and the central bank may allow further appreciation if inflation accelerates.The current account deficit is expected to increase slightly to 10% of GDP in 2013, as the logging decline severely depresses export growth, and import growth—driven by construction and mining—remains firm. The deficit will be funded through continued inflows from development partners and foreign direct investment. Import cover is expected to remain comfortable at 7–8 months in 2013 and 2014. ---------------- Sources: Central Bank of Solomon Islands; ADB estimates. ( http://www.adb.org/sites/default/files/ki/2012/pdf/SOL.pdf )
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