Economy needs to grow by 5% on average to match fast growing population

The economy has to grow at 5% on average to match the fast growing population, said the Governor of the Central Bank of Solomon Islands, Dr Luke Forau.

Speaking during the launch of the 2022 CBSI Annual Report yesterday, Forau said the current estimated average growth rate of 2.1% is not enough to support our growing population, which is currently estimated to grow at 2.4%.

“The economy needs to grow at, at least, a minimum average rate of around 5% in order to support the country’s growing population,” he said.

In order to address this, the governor suggested three key areas for immediate action:

“First, we need to respond to the near-term challenges of securing economic recovery. We need to re-prioritize our policies and focus on promoting sectors that will not only recover the economy but improve and sustain conditions for economic growth. A key aspect in this regard is agriculture,” he said

Dr Forau said agriculture is seen as the sustenance of this economy and will remain so, as 85% of the population is dependent on it for their daily lives.

More broadly, he said, it represents 18% of GDP and 18% of exports in 2022.

“It is therefore not unreasonable to consider redoubling our efforts to expand support in this sector. To this end, implementing a more explicit and meaningful recovery package that finances volume production for example is the right direction forward,” he said.

Dr Forau said in this way: “We ensure we have a resilient population that can cope with current and future economic shocks through increased economic productivity whilst at the macroeconomic level, strong export receipts that contribute towards our foreign reserves, which at the moment is mostly donor driven and is highly susceptible to risk.”

He continued: “Second, given the significant impacts of the shocks and its persistent challenges on our people and businesses, it is critical we accelerate reforms and policies that would support the private sector and new investors to invest and do business in the country.”

Dr Forau said
importantly, improving the efficiency of our administration system and procurement practices through automation will not only increase investment, but also advance innovation and increase job creation in the economy.

As a simple example, promoting policies that facilitate ease of access to land registration for businesses, can increase investment, increase revenue and promote higher growth rates in the long run.

“Thirdly, recognizing the opportunities available to address the many challenges that the country face. I am looking at the opportunities that are provided by the digital platforms. With technology now at the tip of our finger, we need to take advantage and digitalize our economy,” he said.

Dr Forau said: “I would encourage to fast track the implementation of the digital economy strategy, which the Government is currently working on. I am sure once this is implemented, it would improve a lot of efficiencies, and we should be able to provide things like e-commerce, e-education, e-health, e-money, etc., etc, …”