By EDDIE OSIFELO
THE Solomon Islands economy contracted by 4.5 percent in 2020 with log output falling by 12 percent and fish catch by 40 percent largely due to quarantine restrictions on production and shipping.
Asian Development Bank’s (ADB) Solomon Islands Country Office Unit Head Elmar Elbling said this when he presented Asian Development Outlook (ADO) 2021 at Heritage Park Hotel yesterday.
Elbling said construction also slowed as the movement of equipment materials, and workers from overseas were delayed.
He said logging and crop production also suffered under the impact of Cyclone Harold, which struck in April.
Furthermore, Elbling said growth in public services accelerated from 1.3 percent in 2019 to 1.7 percent in 2020 due to COVID-19 related spending.
He said an Economic Stimulus Package contributed to an increase in the fiscal deficit from the equipment of 2.0 percent of Gross Domestic Product in 2019 to 2.5 percent.
“In November 2020, the government announced components of a major policy redirection to focus on protection from COVID-19, economic recovery, and sustainable development.
“It also delayed passage of the 2021 budget until April 2021,” he said.
Elbling said inflation almost doubled from 1.6 percent in 2019 to 3.0 percent in 2020, reflecting in part a tripling of the price of betel nut in early 2020 as adverse weather affected supply.
He said food prices rose by 1.3 percent in 2020 because of damage from Cyclone Harold and tax hikes for rice, sugar, and sugary beverages.
“Higher inflow of grants and declining imports shrank the current account deficit significantly, outweighing the 18 percent fall in exports, which saw logs and timber down by 21 percent and fish by 16 percent.
“Imports fell by 19 percent, led by declines of 28 percent for machinery and vehicles, 23 percent for manufactured goods, and 20 for fuel,” he said.
Elbling said to address stress on the balance of payments caused by COVID-19, the government secured in June a $28.5 million financing from the Rapid Credit Facility and the Rapid Financing Instrument of the International Monetary Fund, which also provided debt service relief through the Catastrophe Containment and Relief Trust.
He said Gross International reserves were up by 12.4 percent at the end of 2020 and were sufficient to cover 19 months of merchandise imports.