CBSI projects SI economy to grow 2.9 percent in 2024

BY NED GAGAHE

The Central Bank of Solomon Islands (CBSI) is projecting that the Solomon Islands post-Pacific Games economy to grow by 2.9 percent in 2024 and 2.5 percent in 2025.

Governor Dr Luke Forau made the projection when he launched the Central Bank’s 2023 Annual Report on Monday 22nd April at the Heritage Park Hotel.

“Turning to the outlook for the year, 2024, the Central Bank projects the post-Pacific Games Solomon Islands’ economy to grow by 2.9 percent in 2024 and 2.5% in 2025.

Governor Forau said this growth projection is anticipated to come from a rebound in fishing and palm oil production, further expansion in the mining sector – with an expected increase in nickel exports – and continued infrastructure support by development partners.

He said the modest growth is also expected across all other sectors.

He adds that in the medium term, growth is projected to average around 2.5 percent.

“This is expected to be triggered by the staggered implementation of planned development projects and the continued prospects for global growth, as logging is forecasted to decline.

“In spite of this positive growth outlook, the state of our economy remains fragile and susceptible to shocks. The key underlying fundamentals of the economy remain unaddressed; this include but not limited to narrow economic base, high unemployment, narrow tax base, continuous fiscal deficit, low production, low demand, shallow market, shallow financial system, and weak monetary policy transmission mechanism.

In addition, the CBSI Governor said domestic challenges still remain, such as rising costs of doing business, inefficient process of accessing to land for investment, and an inefficient domestic infrastructure including inadequate transportation system, coupled with limited access to finance, and limited fiscal space which are further threatened by climate change risk.

“As the largest employer, the largest consumer, the largest contributor to national savings/investments, government action has a larger impact on the economy. It is one of the two pillars of the economy, the other one being the private sector.

“As such, it is crucial that management of fiscal operations is done to spur economic growth and improve the livelihoods of our people. 6 That said, the fiscal outlook for 2024 entails a deficit of 4% of GDP, with a total budget of $4.2 billion.

“I want to stressed that fiscal discipline and effective management of the budget is crucial for the delivery of the budget.

“Until now, we are uncertain of the incoming government’s plans, but any further fiscal expansion would severely strain the fiscal space and put the government in a very tight and strenuous debt situation. With limited financial resources, policy priorities have to be realistic and targeted.” CBSI Governor Dr Luke Forau said.

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