Solomon Islands : GDP growth
Solomon Islands : GDP growth
Economic performance --------------------
Growth slowed to 5.5% in 2012, from 10.6% in the previous year
Growth is expected to slow further, to 4%, in 2013. Although agricultural
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component will be withdrawn from mid-2013 as the country transitions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
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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