CBSI: November riots push back economic growth

Part of the burnt out China town from the recent riots. PHOTO SUPPLIED
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THE November riots in 2021 has pushed the economy into recession with a negative 0.6% growth at the end of 2021.

This after the economy was on its way for recovery in 2021, although at a slower pace, following the depressed condition in 2020.

Central Bank of Solomon Islands (CBSI) Governor, Dr Luke Forau stated this when presented the 2021 Annual Report of the Central Bank of Solomon Islands in this medium last week.

The theme for my statement is “Navigating the way to recovery and strengthening resilience to mitigate future shocks”.

Dr Luke said the decline stemmed from declines across all sectors of the economy, with the exception of fish and copra.

He said the current account position worsened further, driven by the increase in imports relative to the slowdown in exports.

“The fall in primary income surplus during the year also contributed,” he said.

However, Dr Luke said despite the worsening external position, gross foreign reserves for the country grew, reaching 14.2 months of import cover.

He said this is well above the minimum target of six months.

“The increase in foreign reserves came mainly from donor funds and SIG revenue from fishing license,” he added.

Furthermore, in terms of government operations, Dr Luke said the fiscal deficit position stood at 5% of GDP in 2021, owing to the adverse impacts of the COVID-19 pandemic and the November riot.

He said the government debt stock increased to 15% of GDP by the end of the year, owing to COVID related borrowings.

Further to that, he said labour market conditions remained subdued in 2021 in line with sluggish activities.

Furthermore, Dr Luke said partial employment indicators from Solomon Islands National Provident Fund’s (SINPF) showed a decline by 3% to 55,573 contributors in 2021 from 57,028 contributors in 2020.

He said public service positions declined by 38% both for filled and unfilled positions due to the on-going freeze in recruitment.

Moreover, the consumer prices rallied to positive trajectory in 2021, following muted prices in 2020.

Headline inflation reached 2.5% in December due to the surge in food and fuel prices in the second half of last year.

Core inflation increased to 1.2% from -1.5% in 2020.

Dr Luke said the the pick-up in core inflation indicated broad increases in the prices of broad items in the Consumer Price Index (CPI) basket during the year.

He said recent headline inflation for April 2022 eased to minus 0.8% from minus 0.6% in March.

“Falling consumer prices in the domestic component of inflation contributed to this deflation.

“Domestic inflation fell to minus 4.2% from minus 3.2%, owing to price falls in betel-nut and tobacco,” he said.

Further to that, Dr Luke said imported inflation, however, rose to 8% from 6% in March attributable to high global fuel price as a result of the Russian-Ukraine war and its passthrough effects on transport, food and non-alcoholic beverages, housing, water and utilities categories.

“Core inflation increased to 3.3% from 2.8% reflecting broad price increases in April 2022,” he said.