Businesses picking up: Kuma

Minister of Finance and Treasury Harry Kuma
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BUSINESS activities have slowly picked up in the third quarter this year as economy reopens.

Minister of Finance and Treasury, Harry Kuma revealed this in Parliament on Monday when he tabled the resolution in absence of the 2021 National Budget.

The resolution gave the Finance Minister to allow Government spending for the period of four months before the 2021 budget is tabled in Parliament in the first quarter next year.

Kuma said the improvement from the trough in April was most evident, in retail sales, where discretionary consumer spending rose.

“Firms, however, remained cautious despite the improvement, industrial production is still well below December levels.

“Thus, there is a broad based aggregate demand shock, compounding near term supply disruption due to uncertainty,” he said.

Furthermore, Kuma said as the number of global and domestic cases of covid-19 increases, its impact in the construction sector is expected to evolve over the coming months.

He said construction sector is expected to contract in 2020 given the delays to activity early in the year.

“Many infrastructure projects have been delayed until 2021, as the mobilization of technical expertise is constrained in the current environment.

“There are many large infrastructure projects expected to commence in 2021 and construction activity is expected to rebound quickly,” he said.

Moreover, Kuma said the covid-19 has left many manufacturers with a number of concerns.

He said so far, effects have largely been felt by business with very lean supply chains and in recent months there has been a pick up in domestic wholesale and retail activity.

He said manufacturing is expected to contract by around 12.2 percent in 2020, with key manufacturers facing depressed demand or supply side issues throughout 2020.

The hospitality and tourism business has been hit hard, with a number of jobs significantly reduced in one of the most labour intensive sectors of the economy.

Kuma said since March, visitor arrival dropped to zero except select repatriation of select approved expatriates and repatriation of nationals.

He said Solomon Airlines has recently announced further delays to their commercial fights, which are now not expected to recommence until early January 2021.

Kuma said recovery in tourism sector is still uncertain given the poor global outlook.

He said tourism is unlikely to return to pre-COVID 19 levels until beyond 2021 and this will be highly dependent on the covid-19 outlook, as tourists will not feel safe to travel and lifting travel restrictions many be enough to induce an appetite for tourism in the heightened risk environment.

Kuma said overall domestically funded year to date fiscal performance over the 8 months at 30th September, 2020, showed an overall deficit of $265.1 million.