By Gary Hatigeva
WHILE it is projected that the Solomon Islands national economy will grow on an average by around three percent per year over the medium term, driven by major infrastructure investments in the road transport, telecommunications and energy sectors, sources to impact the growth are likely to reduce.
In its latest released Economic update on East Asia and the Pacific for this month, World Bank revealed that in the near term, the country’s economic growth will be supported by major infrastructure projects as logging is projected to decline.
The report, which was launched last week then projected that an impending decline of logging industry will likely significantly reduce growth and a vital source of government revenue.
But the outlook according to the report, with a currently revealed status in logging, is subjected to considerable risks, particularly from any contraction in long demand in China (being the main export destination for logs), or delays in infrastructure projects.
“With accessible logging resources expected to be fully depleted in the long run and uncertainty around the exploitation of the country’s mining potential, Solomon Islands faces the challenge of developing new sources of growth,” the Economic Report further adds.
It then suggested that the Mining has the potential to become key driver of growth in the country, but added that future developments in the mining sector hinge on the development of a legal and regulatory framework conducive to mining and clear procedures for the acquisition of land (for the exploration and exploitation).
“Such frameworks and procedures will also ultimately impact the extent to which forthcoming benefits from mining are shared across the population,” the World Bank Economic Report update adds.
Meanwhile, the report revealed that the baseline scenario highlighted in the report has assumed gold mining activity, the exploration of large nickel deposits, and sustained levels of foreign direct investment averaging 3.3 percent of GDP.
On a specific analysis of the Solomon’s Economy, the report stressed that a return to sound fiscal management in 2018, complemented by key public financial management reforms and the commencement of a tax review, could lay the foundation for additional fiscal space for spending in the social sectors, and on much—needed infrastructure investments, while rebuilding fiscal buffers over the medium-term.
It states that payment of domestic expenditure arears are expected to bring confidence and reduce delays in capital expenditures.
It adds that ongoing expenditure pressure associated with the 2019 general elections, the government’s tertiary education scholarship programme, and the hosting of the 2023 South Pacific Games pose a continued risk to medium-term fiscal consolidation.
It however pointed out that the country’s current account deficit is expected to widen to five percent GDP by end-2018, showing an increase in imports related to much needed infrastructure and energy projects, and the underlying long-run decline in logging exports.
Meanwhile, the report suggested that the Honiara consumer Price Index is expected to remain at around three percent over the medium term.
The World Bank through its report, further pointed that while the growth in developing East Asia and the Pacific is expected to remain strong in 2018, there are emerging risks to stability and therefore emphasized that sustained growth requires close attention by all nations involved.