Solomon Islands’ slow economic growth to go up this year, says World Bank Report
BY NED GAGAHE
Solomon Islands is expecting a pick up in its slow economic growth by 2.8 percent, a new report by the World Bank says.
Solomons is amongst 11 countries in the region estimated to experience slow economic growth in 2024 and 2025.
The new report released by World Bank yesterday found growth in 2023 was “eased to an estimated 5.5 percent following a historically high expansion of 9.1 percent during 2022, the first year of recovery from the pandemic”.
The report “Pacific Economic Update – Back on Track? The Imperative to Invest in Education” was launched in Apia, Samoa.
It surveyed Federated States of Micronesia (FSM), Fiji, Kiribati, Nauru, Palau, Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.
The report outlined the economic status of these countries, four years after the initial COVID-19 shock.
“Collectively, these countries are projected to expand 3.5% in 2024 and 3.3% in 2025, which would still be the fastest rates since 2017, excluding the pandemic bounce-back expansions in 2022 and 2023.
“Moderating growth across Pacific island countries in 2023 reflects the slowdown in still-resilient Fiji, which accounts for more than half of the group’s output.
“Fiji is estimated to have decelerated to 8% in 2023 after surging 20% in 2022. After having returned to pre-pandemic GDP levels in 2023, supported by the resurgence of tourism and robust consumption, Fiji’s growth is expected to normalize toward its long-term rate.
“In the rest of the region, a slight acceleration in growth is anticipated. However, the output is not expected to exceed its pre-pandemic GDP level until 2025.” World Bank said in a statement.
For Solomon Islands, being the second-largest economy in the group beside Fiji it is “estimated to have reversed a 4.1% contraction in 2022 with 1.9% growth last year, driven by hosting the Pacific Games and substantial investments in energy and transport. It is forecast to pick up to 2.8% in 2024.”
World Bank Senior Economist in the Pacific, Ekaterine Vashakmadze said, “Despite a commendable rebound in growth after lifting pandemic restrictions, growth among the PIC-11 countries will face challenges in achieving the full recovery of output growth to its pre-pandemic path,
“Fundamental reforms to invigorate investment growth can help improve medium-term growth prospects.”
According to the report Tourism and remittances-led countries, such as Samoa, Tonga, and Palau have experienced a notable rebound in growth after three consecutive years of contraction.
“This revival is attributed to a robust recovery in visitors, particularly from Australia and New Zealand. Countries [with income led] by sovereign revenue—Kiribati, Nauru, Tuvalu, FSM and Marshall Islands—experienced a relatively mild contraction in 2020 and are now experiencing positive, albeit moderate growth.
“The report underscores the significance of pending Compact Agreements between the United States and FSM, Marshall Islands, and Palau to achieve projected growth rates. If approved, these agreements could create substantial fiscal space, presenting an opportunity for more public investment initiatives.
“Short term risks to the outlook have been more balanced as commodity prices and inflation have eased.” The statement said.
Another World Bank Senior Economist, Reshika Singh however, adds that “risks remain as adverse shifts in the global economy, trade, and tourism may pose challenges to the economic prospects and poverty outcomes. Those could stem from an uncertain global environment, most notably, heightened geopolitical tensions,”
According to World Bank, investment in education is critical to address significant learning gaps and foster sustainable growth.
“A special focus chapter on developing human capital in the Pacific emphasizes that investment in education – through quality and well-resourced, evidence-based teacher training, and ensuring that children are taught in their first language – can deliver immense economic dividends for individuals, families, and society.
“In Tonga, for example, teacher training investments were found to increase students’ future incomes by more than $12 for every dollar spent.” The report said.
World Bank Lead Economist for Human Development in the Pacific, Lars M. Sondergaard said, “If Pacific children struggle to read proficiently by the end of primary school, they will face daunting hurdles to succeed in their further education. While the situation is improving, progress is slow. The most important asset that Pacific Island countries have is not their natural or physical resources, or their geographical location; it is their people.”
